netcomm wireless limited annual report for the year …

NETCOMM WIRELESS LIMITED ANNUAL REPORT For the year ended 30 June 2015 ACN 002 490 486

NetComm Wireless Limited Directors’ Report

For the Year Ended 30 June 2015

1

Your Directors present their report on the Company and its controlled entities for the financial year ended 30 June 2015.

1. General Information

(a) Directors

The names of the directors in office at any time during, or since the end of, the year are:

Name Position held J Milne Non-Executive Director & Chairman K Boundy Non-Executive Director S Black AM Non-Executive Director D P J Stewart CEO & Managing Director K J P Sheridan CFO & Executive Director

Directors have been in office since the start of the financial year to the date of this report unless otherwise

stated.

(b) Company Secretary

Mr Kenneth Sheridan, the Company's CFO & Executive Director, is also the Company Secretary.

(c) Principal Activities

NetComm Wireless Limited (ASX: NTC) is a leading developer of innovative broadband products sold

globally to major telecommunications carriers, core network providers and system integrators. For 33

years NetComm Wireless has developed a portfolio of world first data communication products, and is a

respected global provider of 3G and 4G wireless devices servicing the major telecommunications carriers,

Machine to Machine (M2M) and Rural Broadband markets. NetComm Wireless’ products are designed to

meet the growing needs of today’s data-intensive home, business and industrial broadband applications

and customized to optimise performance in line with global network advancements.

2. Review of Operations and Financial Results

(a) Operating Results

The consolidated profit of the Group after providing for income tax amounted to $2,464,257 (2014:

$1,017,789 profit).

Consolidated Results and Dividends 2015 2014

$ $

Total revenue & other income 74,263,139 64,593,245

EBITDA 7,301,663 5,220,894

Operating profit 2,881,706 826,419

Income tax (expense)/benefit (417,449) 191,370

Net profit for the year 2,464,257 1,017,789



2

2. Review of Operations and Financial Results (continued)

For the year ended 30 June 2015, the Group delivered total revenues of $74.3 million and Earnings

before interest, tax, depreciation and amortisation (EBITDA) of $7.3 million. This is slightly above the

EBITDA guidance range previously provided to the market, and also compares to revenues of $64.6

million and EBITDA of $5.2 million in FY14.

Net profit after tax (NPAT) for FY15 was $2.5 million compared to $1.0 million in the previous year,

representing a year on year increase of 150%.

The M2M business delivered $33.8 million in revenues (FY14 $33 million) which represented

approximately 45% of total Group revenue and approximately 55% in terms of total operating profit. Key

revenue growth in the M2M business related to the Ericsson/NBN fixed wireless rural broadband project

which offset revenues earned last year in respect of the Ericsson/AusNet Services smart metering

contract.

The Company’s Broadband business also continued to exceed expectations with revenues of $40.5

million compared to $31.3 million in the prior year. This excellent result was fuelled by higher sales of

powerline devices as well as ADSL/VDSL products to internet service providers.

(b) Significant Changes in State of Affairs

During the year the Company issued shares under share-based payments as outlined in Note 17(a) and

Note 24 of this report.

No other significant changes in the Company’s state of affairs occurred during the financial year.

(c) Subsequent Events

No matters or circumstances have arisen since the end of the financial year which significantly affected or

may significantly affect the operations of the group, the results of those operations or the state of affairs of

the group in future financial years.

(d) Environmental Regulations

The Group is not subject to significant environmental regulation.

(e) Likely Developments, Business Strategies and Prospects

The Group is continuing to concentrate its efforts on the M2M strategy. The M2M market is a high growth

global market. Ericsson and Qualcomm have predicted that there will be 50 billion connected devices by

2020. The M2M market is still in its infancy and there are no dominant players, with many industry

participants specialising in select verticals.

NetComm Wireless is planning to be one of the leading M2M device providers globally. Based on key

customer wins, we have gained a reputation as an innovative device supplier. This has provided us with

introductions to other leading international telecommunications carriers. At the end of FY15 we had

developed relationships with 5 of the top 20 global M2M telecommunications carriers.

We will continue to leverage our capability to design customised solutions to meet the specific needs of

our customers. This approach allows us to develop tight customer relationships with a high degree of

longevity and stickiness.



3

The cycle time to deliver a new customised product can take between 9 to 12 months and so

considerable investment, mainly of people time, is required before revenues begin to flow. This

investment can be seen in the level of capitalised development costs carried on the Statement of

Financial Position.

All of our manufacturing occurs offshore, in Asia. By using contract manufacturers we have the ability to

scale our business rapidly with low incremental capital expenditure.

As well as global telecommunications carriers, we are targeting the following key M2M industry verticals:

Utility smart grids (electricity and water)

E-health in respect of connected in-home devices which need central monitoring

Building automation, including heating, ventilation and air conditioning

Business services, including point of sale, digital signage and vending machines/kiosks

Manufacturing and construction

A key component of our strategy is to leverage “coat tail” relationships. This is where we form

relationships with key suppliers or ecosystem players and leverage their knowledge, contacts and

reputation within key verticals.

In FY16 we expect to see meaningful contributions from our overseas jurisdictions, being North America,

Europe, Japan and the Middle East which are specifically focussed on M2M opportunities.

The Ericsson NBN fixed wireless contract is a key domestic M2M contract. FY15 saw a significant growth

in rollout volumes and revenues. We are confident that this contract will deliver further substantial value to

the Company particularly as the pace of the rollout increases in FY16.

Based on our experience with the NBN fixed wireless rural broadband project the Company is actively

pursuing opportunities in overseas jurisdictions in relation to fixed wireless rural broadband solutions, with

a particular emphasis on the USA.



4

3. Directors’ Information

(a) Information on Directors

Mr Justin Milne Non-Executive Independent Director & Chairman since 7 March 2012

Mr Milne has substantial telecommunications industry experience and is an experienced company director having served in diverse industry sectors with a multinational focus. He had an executive career in telecommunications, marketing and media. From 2002 to 2010 he was Group Managing Director of Telstra’s broadband and media businesses and led Telstra’s New Media businesses in China. Prior to that he was CEO of OzEmail and of MSN Australia. He is currently Chairman of MYOB, a Non-Executive Director of NBN Co Limited, Tabcorp Holdings Limited, SMS Management & Technology Limited and Members Equity Bank Limited.

Mr Ken Boundy Non-Executive Independent Director since 24 August 2012

Mr Boundy has significant marketing, distribution and international business experience across a diverse range of industry sectors. He is currently Chairman and/or Non-Executive Director on five boards and part owner of two businesses. He has held a number of prominent positions over the past thirty years including: Managing Director of Tourism Australia; Executive General Manager, International, of James Hardie Industries Limited; Group General Manager, Corporate Development, of Goodman Fielder Limited; CEO, of Goodman Fielder Asia, Singapore and Director, Industry Development, of the Victorian Department of Industry Commerce and Technology.

Mr Stuart Black AM Non-Executive Independent Director since 21 March 2013

Mr Black is a prominent Chartered Accountant and experienced Company Director. A former Managing Partner in the chartered accounting firm Chapman Eastway, he has extensive experience in professional services, agribusiness, financial services, manufacturing, import, distribution, IT and biotechnology. Mr Black is Non-Executive Director of Australian Agricultural Company Limited and a former Non-Executive Director of Coffey International Limited, Chair of the Chartered Accountants Benevolent Foundation Ltd and a Non-Executive Director of The Country Education Foundation of Australia Ltd. He was the former Chair and is a current Director of the Accounting Professional and Ethical Standards Board Ltd, as well as being a Past President of the Institute of Chartered Accountants in Australia.

Mr David P J Stewart

CEO & Managing Director since 14 November 1997

Mr Stewart founded Banksia Technology Pty Limited in 1988 and successfully managed the company as a fast growing and highly profitable business. In 1996, he instigated the successful takeovers of a number of his competitors including NetComm Wireless Limited, which was completed in November 1997. Mr Stewart assumed the role of Managing Director of the merged entity and remains the single largest shareholder of NetComm Wireless. He has a strong financial background, extensive experience in sales and marketing and has maintained an ongoing interest in new technologies. While being very active in the operational aspects of the business, Mr Stewart also focuses on the strategic direction of the company.



5

3. Directors’ Information (continued)

(a) Information on Directors (continued)

Mr Kenneth J P Sheridan

CFO & Executive Director since 20 December 2010

Mr Sheridan is a Chartered Accountant with over 30 years’ experience in senior management in major corporations in Australia and Asia. He spent 11 years with KPMG before he moved into the commercial sector where he held several CFO roles with large multinational companies in Australia and Asia including three years as Finance Director of a top 10 Malaysian listed consumer goods company. Mr Sheridan was the Group CFO for Tenix, one of Australia’s largest private companies. In the 6 years prior to joining NetComm Wireless, Mr Sheridan was Managing Director and major shareholder of Acelero Pty Ltd, a human resources software company.

At the date of this report, the interest of the Directors in the ordinary shares of the Company are:

Ordinary Shares

J Milne 710,588 K Boundy 650,000 S Black AM 180,000 D P J Stewart 23,000,000 K J P Sheridan 566,946

(b) Meetings of Directors

The number of meetings of Directors (including meetings of committees of Directors) held during the year

and the number of meetings attended by each Director during the year were as follows:

Director

Board Meetings

Audit and Risk

Committee

Nominations and

Remuneration

Committee

A B A B A B

J Milne 7 7 4 4 2 2

K Boundy 7 7 4 4 2 2

S Black AM 7 7 4 4 2 2

D P J Stewart 7 7 - - - -

K J P Sheridan 7 7 - - - -

A is the number of meetings the Director was entitled to attend

B is the number of meetings the Director attended

J Milne, K Boundy & S Black are the members of Audit & Risk Committee and Nominations & Remuneration

Committee.

4. Share Options

At the date of this report, there are no options outstanding. During the year no options were exercised or

granted.



6

5. Share Rights No share rights were outstanding as at the date of this report. During the course of the year no share rights were exercised or issued.

6. Remuneration Report - Audited

This remuneration report, which forms part of the Directors’ Report, sets out the information about the remuneration of NetComm Wireless Limited’s Directors and its senior management for the financial year ended 30 June 2015.

The following persons were key management personnel of NetComm Wireless Limited during the financial year:

(a) Remuneration Policy

The Board’s policy for determining the nature and amount of remuneration of key management personnel

for the Group is as follows:

• The Nominations & Remuneration Committee assume responsibility for making recommendations to

the Board in respect of remuneration policies and practices generally and making recommendations

to the Board on remuneration packages and other terms of employment for Executive Directors, other

senior executives and Non-Executive Directors.

• The Board reviews the remuneration packages of all Directors and other key management personnel

on an annual basis. Remuneration packages are reviewed and determined with due regard to current

market rates and are benchmarked against comparable industry salaries. The overall objective is to

ensure maximum shareholder benefit from the retention of a quality Board and Executive Team. To

assist in achieving this objective, the nature and amount of the Executives’ and Executive Directors’

and other key management personnel’s emoluments is linked to the Group’s financial and operational

performance, as determined by the Board.

• Any shares that are issued as part of remuneration are issued at market price. Recipients are not

permitted to enter in to transactions which limit the economic risk of participating in this scheme.

For FY15 the Chairman of the Company received an annual fee of $97,500 with all other Non-Executive

Directors receiving $57,500 per annum. Given the size of the Company and the Board, no additional

payments are made in respect of Chairmanship or Membership of any of the Board Committees.

Name Position held

J Milne Non-Executive Director & Chairman

K Boundy Non-Executive Director

S Black AM Non-Executive Director

D P J Stewart CEO & Managing Director

K J P Sheridan CFO & Executive Director

S Collins Senior Vice President Engineering

M Cornelius Research & Development Director

D Morrison General Manager - Sales Australia and New Zealand

R Parker General Manager – Broadband Sales Australia and New Zealand

P Micallef General Manager – M2M Sales



7

6. Remuneration Report – Audited (continued)

(b) Relationship between the remuneration policy and company performance

The following tables set out summary information about the consolidated entity’s earnings and movements

in shareholder wealth for the five years to June 2015:

Continuing Operations

30 June 2015

$

30 June 2014

$

30 June 2013

$

30 June 2012

$

30 June 2011

$

Revenue 74,327,275 64,593,245 42,857,600 59,361,477 67,602,485

Net Profit/(loss) before tax 2,881,706 826,419 (2,681,095) 1,772,049 2,145,565

Net Profit/(loss) after tax 2,464,257 1,017,789 (541,624) 1,570,179 1,057,464

Net Loss from discontinued operations

-

-

-

(729,668)

(2,259,611)

Profit/(loss) for the year 2,464,257 1,017,789 (541,624) 840,511 (1,202,147)

30 June 2015

$

30 June 2014

$

30 June 2013

$

30 June 2012

$

30 June 2011

$

Share price at start of the year 0.74 0.26 0.12 0.13 0.20

Share price at end of the year 0.74 0.74 0.26 0.12 0.13

Interim dividend - - - - 0.5cps

Final dividend - - - - -

Continuing Operations

Basic earnings/(loss) per share

(cents)

1.91

0.79

(0.51)

1.51

1.02

Diluted earnings/(loss) per share

(cents)

1.91

0.79

(0.51)

1.50

1.02

Discontinued Operations

Basic loss per share (cents) - - - (0.70) (2.18)

Diluted loss per share (cents) - - - (0.70) (2.18)

As stated above the overall objective of the Board’s remuneration policy is to ensure maximum shareholder benefit from the retention of a quality Board and Executive team and to assist in achieving this objective by linking executive rewards to the Group’s financial and operational performance. The Board is of the opinion that the remuneration policy and company performance are closely aligned.



8


(c) Details of Remuneration for Year Ended 30 June 2015.

Details of each element of the remuneration of key management personnel and other executives of NetComm Wireless Limited are set out in the following tables:

Year ended 30 June 2015:

Short Term Employee Benefits Post-

Employment Benefits

Long Term

benefits

Share Based

Payments

Other Benefits

Total % of Remuneration

that is performance

based

% of Remuneration

that consists of Shares Salary &

Fees Short Term

Incentive Plan

Non-Monetary Benefits

Super-annuation

Long Service Leave

Shares Termination Benefits

Independent Non-Executive Directors $ $ $ $ $ $ $ $

J Milne 89,450 - - 8,050 - - - 97,500 - -

K Boundy 52,037 - - 5,463 - - - 57,500 - -

S Black AM 52,037 - - 5,463 - - - 57,500 - -

Executive Directors

D P J Stewart 380,000 153,000 - 70,000 7,278 - - 610,278 25% -

K J P Sheridan 270,000 64,000 - 26,027 - - - 360,027 18% -

Executive Officers

D Morrison* 132,074 56,250 - 12,281 - - - 200,605 28% -

R Parker** 33,654 - - 3,197 - - - 36,851 -

P Micallef*** 34,738 - - 3,300 - - - 38,038 -

M Cornelius 158,753 32,000 15,000 14,250 2,498 27,750 - 250,251 13% 11%

S Collins 188,701 40,000 - 18,653 18,905 55,500 - 321,759 12% 17%

Total Key Management Personnel Compensation 1,391,444 345,250 15,000 166,684 28,681 83,250 - 2,030,309

* D Morrison passed away on 10 February 2015.

** R Parker commenced as General Manager – Broadband Sales Australia and NZ on 13 April 2015.

*** P Micallef commenced as General Manager – M2M Sales on 22 April 2015.



9


(d) Details of remuneration for year ended 30 June 2014.

Details of each element of the remuneration of key management personnel and other executives of NetComm Wireless Limited are set out in the following tables:

Year ended 30 June 2014:

Short Term Employee Benefits Post-

Employment Benefits

Long Term

benefits

Share Based

Payments

Other Benefits

Total % of Remuneration

that is performance

based

% of Remuneration

that consists of options/share

rights Salary &

Fees Short Term

Incentive Plan

Non-Monetary Benefits

Super-annuation

Long Service Leave

Share Rights

Termination Benefits

Independent Non-Executive Directors $ $ $ $ $ $ $ $

J Milne 89,450 - - 8,050 - - - 97,500 - -

K Boundy 52,325 - - 5,175 - - - 57,500 - -

S Black AM 52,325 - - 5,175 - - - 57,500 - -

Executive Directors

D P J Stewart 416,538 525,000 - 33,462 7,528 - - 982,528 53% -

K J P Sheridan 275,229 225,000 - 24,771 - - - 525,000 43% -

Executive Officers

D Morrison 175,866 60,000 11,538 17,321 10,806 - - 275,531 22% -

M Cornelius 150,000 72,000 15,000 15,160 2,560 - 254,720 28% -

S Collins 168,845 88,125 9,231 15,453 - - - 281,654 31%

Total key management personnel compensation 1,380,578 970,125 35,769 124,567 20,894 - - 2,531,933



10


(e) Short Term Incentive Plan - Cash Bonuses Key management personnel, other than Non-Executive Directors, and other executives are entitled to a short-term cash incentive based on performance criteria which is defined and granted at the discretion of the Board. Where performance criteria are not met in the current year the bonus is forfeited and may not be carried forward to a future year. In order to enhance retention of key personnel, one third (33.3%) of any earned incentive is deferred for one year and is payable if the person remains an employee at the time of the payment in August of the following year. Short term incentive plans are based on the achievement of specified EBITDA levels and personal objectives. For the year ended 30 June 2015, the following table discloses the total entitlement and the amount achieved.

Participants Role Base

Bonus

Incentive

Total

Bonus

Achieved

% Achieved Amount

Payable in

August

2015

Amount

Deferred to

August

2016

D P J Stewart CEO & Managing Director

$450,000

$153,000

34%

$102,000

$51,000

K J P Sheridan CFO & Executive Director

$200,000

$64,000

32%

$42,667

$21,333

D Morrison General Manager - Sales

$75,000

$56,250

75%

$56,250

Nil

S Collins Senior Vice President Engineering

$100,000

$40,000

40%

$26,667

$13,333 M Cornelius Research &

Development Director

$100,000

$32,000

32%

$21,333

$10,667

Total

$925,000

$345,250

$248,917

$96,333

Rationale for Determination of Incentive Payments The 2015 short term incentive plan provides the Board with the discretion of applying an adjustment multiplier of between 0 and 1.5 to the base bonus incentive entitlement based on the overall performance of each individual included in the incentive plan. For FY15, the Board applied a multiplying factor of 1.0 times to the incentive entitlements of the CEO & Managing Director and the CFO & Executive Director. This means that there was no increase or decrease in the incentive entitlement as originally calculated.



11

6. Remuneration Report - Audited (continued) (f) Service Contracts

The following table provides employment details of persons who were, during the financial year, the Directors and executive officers of the consolidated group receiving the highest remuneration.

Position held as at 30 June 2015 Contract details (duration & termination)

J Milne Non-Executive Director & Chairman No fixed term. No retirement benefits other

than superannuation

K Boundy Non-Executive Director No fixed term. No retirement benefits other

than superannuation

S Black AM Non-Executive Director No fixed term. No retirement benefits other

than superannuation

D P J Stewart CEO & Managing Director Standard employment agreement. 12

months’ notice required to terminate.

Entitled to 12 months gross salary upon

termination.

K J P Sheridan CFO & Executive Director Standard employment agreement. 2



termination.

S Collins Senior Vice President Engineering Standard employment agreement. 2



termination.

R Parker General Manager - Broadband

Sales Australia and New Zealand

Standard employment agreement. 2



termination.

P Micallef General Manager - M2M Sales Standard employment agreement. 2



termination.

M Cornelius Research & Development Director Standard employment agreement. 2



termination.



12

6. Remuneration Report - Audited (continued) (g) Shares Held by Key Management Personnel

Fully paid ordinary shares as at 30 June 2015:

Balance

1 July, 2014 Movement during the

Year Balance

30 June, 2015

No. No. No.

J Milne 380,588 330,000 710,588

K Boundy 650,000 - 650,000

S Black 180,000 - 180,000

D P J Stewart* 22,974,596 25,404 23,000,000

K J P Sheridan 367,588 199,358 566,946

P Micallef - - -

R Parker - - -

D Morrison** 350,000 (350,000) -

S Collins - 100,000 100,000

M Cornelius 1,756,170 50,000 1,806,170

Total 26,658,942 354,762 27,013,704

* The 23,000,000 shares held by D P J Stewart's related entities. ** D Morrison passed away on 10 February 2015 and his shares reverted to his Estate.

Fully paid ordinary shares as at 30 June 2014:

Balance

1 July, 2013 Movement during the

Year Balance

30 June, 2014

No. No. No.

J Milne 180,588 200,000 380,588

K Boundy 450,000 200,000 650,000

S Black - 180,000 180,000

D P J Stewart* 22,974,596 - 22,974,596

K J P Sheridan 204,588 163,000 367,588

D Morrison 350,000 350,000

S Collins - - -

M Cornelius 2,486,170 (730,000) 1,756,170

Total 26,645,942 13,000 26,658,942

* The 22,974,596 shares held by D P J Stewart's related entities.

END OF AUDITED REMUNERATION REPORT



13

7. Other Information

(a) Indemnification and Insurance of Directors and Auditors

All Directors of the Group, its secretaries and executive officers are entitled to be indemnified under

Clause 23 of the Company’s Constitution to the maximum extent permitted by law unless the liability

arises out of conduct involving a lack of good faith. Since the end of the previous financial year, the Group

has paid insurance premiums in respect of a directors and officers liability insurance contract against

certain liabilities (subject to exclusions), for all current and former officers of the Group, including all

Directors named in this report, the Company secretaries and executive officers of the Group, and

Directors and officers who have retired or relinquished their positions.

The insurance policies prohibit disclosure of the premiums paid in respect of those policies and the nature

of the liabilities insured by the policies.

The Group has not otherwise, during or since the end of the financial year, except to the extent permitted

by law, indemnified or agreed to indemnify any current or former officer or auditor of the Group against a

liability incurred by such an officer or auditor.

(b) Proceedings on Behalf of the Company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring

proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a

party, for the purpose of taking responsibility on behalf of the Company for all or part of those

proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court

under section 237 of the Corporations Act 2001.

(c) Auditors Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2015 has been received and can

be found on page 15 of the financial report.

(d) Non Audit Services

The Directors are satisfied that the provision of non-audit services during the year is compatible with the

general standard of independence for auditors imposed by the Corporations Act 2001, because the

nature and scope of each type of non-audit service provided means that auditor independence was not

compromised.

Fees for non-audit services which were paid/payable to the external auditors (Grant Thornton Audit Pty

Ltd) during the year ended 30 June 2015 are disclosed at Note 3(c).

(e) Corporate Governance

The Directors of NetComm Wireless Limited have always recognised the need for appropriate standards

of corporate behaviour and accountability to ensure the quality of the Company’s financial reporting.

Recent commentary and directions from Australian regulatory authorities have further emphasised this

issue in the minds of investors. The Directors of NetComm Wireless Limited reaffirm their support for the

principles of corporate governance and transparency and have reviewed their policies with regard to

current best practice. The annual Corporate Governance Statement is available on the Company’s

website at http://www.netcommwireless.com/investor-relations/corporate-governance.

.

http://www.netcommwireless.com/investor-relations/corporate-governance



14

7. Other Information (continued)

(f) Dividends

No dividends were paid during the financial year 2015 (2014: Nil).

The Directors’ report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the Directors Director: Director:

J Milne, Chairman Sydney

D P J Stewart, CEO & Managing Director Sydney

4 September 2015 4 September 2015

Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton

Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

15

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Correspondence to:

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Auditor’s Independence Declaration

To the Directors of NetComm Wireless Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead

auditor for the audit of NetComm Wireless Limited for the year ended 30 June 2015, I

declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act

2001 in relation to the audit; and

b no contraventions of any applicable code of professional conduct in relation to the

audit.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

S M Coulton

Partner – Audit & Assurance

Sydney, 4 September 2015

NetComm Wireless Limited Index to the Financial Statements


16

Contents Page

Consolidated Statement of Profit or Loss & Other Comprehensive Income 17

Consolidated Statement of Financial Position 18

Consolidated Statement of Changes in Equity 19

Consolidated Statement of Cash Flows 20

Notes to the financial statements 1.

Statement of Significant Accounting Policies 21

2.

Revenue and Other Revenue from Operations 39

3.

Expenses 39

4.

Income Tax Expense/(Benefit) 40

5.

Dividends 42

6.

Cash and Cash Equivalents 42

7.

Trade and Other Receivables 43

8.

Inventories 44

9.

Other Assets 44

10. Property, Plant and Equipment 44

11. Goodwill 45

12. Other Intangible Assets 47

13. Trade and Other Payables 48

14. Borrowings 48

15. Employee Benefits 49

16. Other Liabilities 49

17. Issued Capital 49

18. Reserves 50

19. Fair Value Measurement 51

20. Contingent Liabilities 51

21. Commitments 51

22. Cash Flow Information 52

23. Related Party Transactions 53

24. Share-Based Payments 53

25. Retirement Benefit Obligations 55

26. Earnings per Share 55

27. Financial Instruments 56

28. Events after the Reporting Date 61

29. Segment Reporting 62

30. Parent Entity Disclosures 64

31. Company Details 65

Director’s Declaration 66

Independent Auditor's Report 67

ASX Additional Information 69

Corporate Directory 70

NetComm Wireless Limited Consolidated Statement of Profit or Loss & Other Comprehensive Income


17

2015

2014

Note

$

$

Revenue from the sale of goods 2

74,263,139

64,524,993

Other revenue 2

64,136

68,252

Change in inventories

2,722,220

(2,455,632)

Raw materials consumed

(53,783,992)

(42,735,039)

Employee benefits

(8,952,575)

(8,035,434)

Other expenses 3

(7,011,265)

(6,146,246)

Earnings before interest, tax, depreciation and amortisation (EBITDA)

7,301,663

5,220,894

Depreciation and amortisation expense 3

(3,815,439)

(3,667,845)

Finance costs 3

(604,518)

(726,630)

Profit before income tax

2,881,706

826,419

Income tax (expense)/benefit 4

(417,449)

191,370

Profit for the year

2,464,257

1,017,789

Attributable to equity holders of the parent

2,464,257

1,017,789

Other comprehensive (expense)/income

Items that may be reclassified subsequently to profit or loss:

Exchange differences arising on translation of foreign operations

(146,590)

241,565

Reclassification of cash flow hedging to profit and loss

5,119

984,410

Net change in the fair value of cash flow hedges recognised in equity

-

(5,119)

Income tax relating to components of other comprehensive income 4

(1,536)

(293,787)

Other comprehensive (loss)/income for the period (net of tax)

(143,007)

927,069

Total comprehensive income for the period

2,321,250

1,944,858

Attributable to equity holders of the parent

2,321,250

1,944,858

2,321,250

1,944,858

Earnings per share

Basic earnings per share (cents per share) 26

1.91

0.79

Diluted earnings per share (cents per share) 26

1.91

0.79

The above consolidated statement of profit or loss & other comprehensive income should be read in conjunction with the accompanying notes.

NetComm Wireless Limited Consolidated Statement of Financial Position


18

2015

2014

Note

$

$

ASSETS

Current assets Cash and cash equivalents 6

3,400,344

4,307,490

Trade and other receivables 7

13,647,620

10,665,140

Inventories 8

10,124,081

7,401,861

Other assets 9

1,304,503

1,319,357

Total current assets

28,476,548

23,693,848

Non-current assets Property, plant and equipment 10

1,798,290

1,178,597

Deferred tax assets 4 (c)

4,573,185

4,515,004

Goodwill 11

895,999

895,999

Other intangible assets 12

8,694,400

7,173,580

Other assets 9

-

332,143

Total non-current assets

15,961,874

14,095,323

TOTAL ASSETS

44,438,422

37,789,171

LIABILITIES

Current liabilities Trade and other payables 13

14,774,353

9,298,662

Borrowings 14

2,806,705

4,733,301

Employee benefits 15

951,250

910,723

Income tax liability

174,856

-

Other current liabilities 16

301,837

393,257

Total current liabilities

19,009,001

15,335,943

Non-current liabilities

Borrowings 14

538,122

24,539

Employee benefits 15

296,030

237,920

Total non-current liabilities

834,152

262,459

TOTAL LIABILITIES

19,843,153

15,598,402

NET ASSETS

24,595,269

22,190,769

EQUITY

Issued capital 17

15,432,272

15,349,022

Reserves 18

584,818

727,825

Retained earnings

8,578,179

6,113,922

TOTAL EQUITY

24,595,269

22,190,769

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

NetComm Wireless Limited Consolidated Statement of Changes in Equity


19

Ordinary Retained Foreign Foreign Options and Total

Shares Earnings Currency Exchange Share Rights

Translation Hedging Reserve

Reserve Reserve

Note $ $ $ $ $ $

Balance at 1 July 2014 15,349,022 6,113,922 335,600 (3,583) 395,808 22,190,769

Profit for the period - 2,464,257 - - - 2,464,257

Exchange difference on translation of foreign operations

18 (b) - - (146,590) - - (146,590)

Foreign exchange hedging (Net of tax)

- Reclassified to profit and loss account 18 (c) - - - 3,583 - 3,583

Total comprehensive income for the period - 2,464,257 (146,590) 3,583 - 2,321,250

Recognition of share based payments 17 (a) 83,250 - - - - 83,250

Balance at 30 June 2015 15,432,272 8,578,179 189,010 - 395,808 24,595,269

Balance at 1 July 2013 14,331,878 5,096,133 94,035 (689,087) 395,808 19,228,767

Profit for the period - 1,017,789 - - - 1,017,789


18 (b) - - 241,565 - - 241,565

Foreign exchange hedging (Net of tax) 18 (c)

- Current year loss - - - (3,583) - (3,583)

- Reclassified to profit and loss account - - - 689,087 - 689,087

Total comprehensive income for the period - 1,017,789 241,565 685,504 - 1,944,858

Issue of ordinary shares (Net of transaction costs and tax)

17 (a) 931,324 - - - - 931,324

Exercise of options 17 (a) 85,820 - - - - 85,820

Balance at 30 June 2014 15,349,022 6,113,922 335,600 (3,583) 395,808 22,190,769

The above consolidated statement changes in equity should be read in conjunction with the accompanying notes.

NetComm Wireless Limited Consolidated Statement of Cash Flows


20

2015

2014

Note

$

$

Cash flows from operating activities: Receipts from customers

78,402,639

64,385,960

Payments to suppliers and employees

(71,165,313)

(57,895,289)

Finance costs

(604,518)

(726,630)

Income taxes paid

(254,055)

(107,449)

Net cash provided by operating activities 22

6,378,753

5,656,592

Cash flows from investing activities: Interest received

64,136

66,197

Acquisition of property, plant and equipment

(1,388,862)

(265,870)

Acquisition of intangible assets

(4,548,160)

(3,660,160)

Net cash used in investing activities

(5,872,886)

(3,859,833)

Cash flows from financing activities: Proceeds from issue of shares & options (net of transaction costs) 17(a)

-

1,017,144

Proceeds from borrowings

43,620,856

39,917,087

Repayment of borrowings

(45,033,869)

(42,305,567)

Net cash used in financing activities

(1,413,013)

(1,371,336)

Net (decrease)/increase in cash and cash equivalents held (907,146) 425,423

Cash and cash equivalents at beginning of financial period 4,307,490 3,882,067

Cash and cash equivalents at end of financial period 6

3,400,344

4,307,490

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

NetComm Wireless Limited Notes to the financial statements


21

1 Statement of Significant Accounting Policies

General Information

The financial statements are general purpose financial statements that have been prepared in

accordance with Australian Accounting Standards, including Interpretations, other authoritative

pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The financial statements cover the consolidated Group of NetComm Wireless Limited (“the Group” or the

“consolidated entity”). NetComm Wireless Limited is a listed public company, incorporated and domiciled

in Australia, and is a for-profit entity for the purpose of preparing financial statements.

Compliance with Australian Accounting Standards results in the compliance with the International

Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The financial statements were authorised for issue by the Directors on 4 September 2015.

The following is a summary of the material accounting policies adopted by the Group in the preparation of

the financial statements. The accounting policies have been consistently applied, unless otherwise stated.

Basis of Preparation

The financial statements have been prepared on an accruals basis and are based on historical costs

modified by the revaluation of selected non-current assets, financial assets and financial liabilities for

which the fair value basis of accounting has been applied. Cost is based on the fair values of the

consideration given in exchange for assets. All amounts are presented in Australian dollars, unless

otherwise noted.

Clarification of terminology used in the Statement of Comprehensive Income

Under the requirements of AASB 101: “Presentation of Financials Statements”, we must classify all of our

expenses (apart from any finance costs) according to either the nature (type) of the expense of the

function (activity to which the expense relates). We have chosen to classify our expenses using the

nature classification as it more accurately reflects the type of operations we undertake.

Earnings before interest, income tax, depreciation and amortisation (EBITDA) reflects our profit for the

year prior to including the effect of net finance costs, income taxes, depreciation and

amortisation. Depreciation and amortisation are calculated in accordance with AASB 116: “Property,

Plant and Equipment” and AASB 138: “Intangible Assets” respectively. We believe that EBITDA is a

relevant and useful financial measure used by management to measure the Company’s operating

performance.

Our management uses EBITDA in combination with other financials measures, primarily to evaluate the

Group’s operating performance before financing, income tax and non-cash capital related expenses. In

addition, we believe EBITDA is useful to investors because analysts and other members of the

investment community largely view EBITDA as a key and widely recognised measure of operating

performance.



22

1 Statement of Significant Accounting Policies

Adoption of new and revised Accounting Standards that are effective for these financial

statements

The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian

Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current

reporting period.

None of the new standards and amendments that are mandatory for the first time for the financial year

beginning 1 July 2014 affected any of the amounts recognised in the current period or any prior period

and are not likely to affect future periods.

Critical accounting judgements and key sources of uncertainty

In the application of the Group’s accounting policies, management is required to make judgements,

estimates and assumptions about carrying values of assets and liabilities that are not readily apparent

from other sources. The estimates and associated assumptions are based on historical experience and

other factors that are considered to be relevant. Actual results may differ from these estimates. The

estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised if the revision affects only that

period or in the period of the revision and future periods if the revision affects current and future periods.

Refer to Note 1(x) for a discussion of critical judgements in applying the entity’s accounting policies and

key sources of estimation uncertainty.

(a) Principles of Consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of NetComm

Wireless Limited as at 30 June 2015 and the results of all subsidiaries for the year then ended.

A subsidiary is an entity over which NetComm Wireless Limited has control. The Group controls an entity

when it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the

ability to affect those returns through its power over the subsidiary.

A list of subsidiaries is contained in Note 30(d) to the financial statements. All subsidiaries have a 30 June

financial year end.

All intercompany balances and transactions between entities in the consolidated entity, including any

unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries

have been changed where necessary to ensure consistencies with those policies applied by the parent

entity.

Subsidiaries are fully consolidated from the date which control is transferred to the Group. They are

deconsolidated from the date control ceases.



23

1 Statement of Significant Accounting Policies (continued)

(b) Business Combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of

the business combination is measured as the aggregate of the fair values (at the date of exchange) of

assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for

control of the acquiree. Acquisition related costs are recognised in the profit or loss as incurred. The

acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition

under AASB 3 ‘Business Combinations’ are recognised at their fair values at the acquisition date, except

for non-current assets (or disposal groups) that are classified as held for sale in accordance with AASB 5

‘Non-current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at

fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess

of the cost of the business combination over the Group’s interest in the net fair value of the identifiable

assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the

net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of

the business combination the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of

the net fair value of the assets, liabilities and contingent liabilities recognised.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are

discounted to their present value as at the date of exchange. The discount rate used is the entity’s

incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an

independent financier under comparable terms and conditions.

(c) Foreign Currency Transactions and Balances & Policy on Hedge Accounting for Foreign Exchange Exposures

Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary

economic environment in which that entity operates. The consolidated financial statements are presented

in Australian dollars which is the parent entity’s functional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing

at the date of the transaction. Foreign currency monetary items are translated at the year end exchange

rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the

date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at

the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in profit or loss in the

period in which they arise.



24


(c) Foreign Currency Transactions and Balances & Policy on Hedge Accounting for Foreign

Exchange Exposures (continued)

Group companies

The financial results and position of foreign operations whose functional currency is different from the

Group’s presentation currency are translated as follows:

• assets and liabilities are translated at year end exchange rates prevailing at that reporting date;

• income and expenses are translated at average exchange rates for the period; and

• all resulting exchange differences shall be recognised in other comprehensive income and as a

separate component of equity.

Exchange differences arising on translation of foreign operations are transferred directly to the Group’s

foreign currency translation reserve in the statement of financial position. These differences are

recognised in profit or loss in the period in which the operation is disposed. Goodwill and fair value

adjustments arising on the acquisition of a foreign entity on or after the date of transition to IFRS are

treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the

reporting date.

Derivative financial instruments and hedge accounting

Derivative financial instruments are accounted for as financial assets or liabilities at fair value through

profit or loss (FVTPL) except for derivatives designated as hedging instruments in foreign exchange

hedge relationships, which requires a specific accounting treatment. To qualify for hedge accounting, the

hedging relationship must meet several strict conditions with respect to documentation, probability of

occurrence of the hedged transaction and hedge effectiveness.

All derivative financial instruments used for hedge accounting are recognised initially at fair value and

reported subsequently at fair value in the statement of financial position.

To the extent that the hedge is effective, changes in the fair value of derivatives designated as hedging

instruments are recognised in other comprehensive income and included within the foreign exchange

hedge reserve in equity. Any ineffectiveness in the hedge relationship is recognised immediately in profit

or loss.

At the time the hedged item affects profit or loss, any gain or loss previously recognised in other

comprehensive income is reclassified from equity to profit or loss and presented as a reclassification

adjustment within other comprehensive income. However, if a non-financial asset or liability is recognised

as a result of the hedged transaction, the gains and losses previously recognised in other comprehensive

income are included in the initial measurement of the hedged item.

If a forecast transaction is no longer expected to occur or if the hedging instrument becomes ineffective,

any related gain or loss recognised in other comprehensive income is transferred immediately to profit or

loss.



25


(d) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of

GST incurred is not recoverable from the taxation authority or it is recognised as part of the cost of

acquisition of an asset or part of an item of expenses.

Receivables and payables in the statement of financial position are shown inclusive of GST and the net

amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or

payables. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST

component of investing and financing activities, which are disclosed as operating cash flows.

(e) Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any non-

assessable or disallowed items. It is calculated using the tax rates that have been enacted or are

substantively enacted by the reporting date.

Deferred tax is accounted for in respect of temporary differences arising between the tax bases of assets

and liabilities and their carrying amounts in the financial statements. No deferred income tax will be

recognised from the initial recognition of an asset or liability, excluding a business combination, where

there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is

realised or liability is settled. Deferred tax is credited in profit or loss except where it relates to items that

may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred tax assets are recognised to the extent that it is probable that future tax profits will be available

against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the

assumption that no adverse change will occur in income taxation legislation and the anticipation that the

consolidated Group will derive sufficient future assessable income to enable the benefit to be realised and

comply with the conditions of deductibility imposed by the law.

NetComm Wireless Limited and its wholly-owned Australian subsidiaries have formed an income tax

consolidated Group under the tax consolidation regime. The Group notified the Australian Tax Office that

it had formed an income tax consolidated Group to apply from 20 August 2006.

The stand-alone taxpayer within a Group approach has been used to allocate current income tax expense

and deferred tax expense to wholly-owned subsidiaries that form part of the tax consolidated Group.

Each entity in the group recognises its own current and deferred tax assets and liabilities, as if they

continue to be a separate taxable entity in their own right, except for any deferred tax assets resulting

from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current

tax liability of each Group entity is then subsequently assumed by the parent entity.

NetComm Wireless Limited is entitled to claim R&D tax incentive. The R&D tax incentive is calculated

using the estimated R&D expenditure multiplied by a 40% non-refundable tax offset. The Group accounts

for this tax incentive as tax credits which means that it will reduce income tax payable and current tax

expense. A deferred tax asset is recognised for any unclaimed tax credits that are carried forward as

deferred tax assets.



26


(f) Revenue Recognition

Revenue is measured at the fair value of consideration received or receivable. Revenue is reduced for

estimated customer returns, rebates and other similar allowances.

Revenue from the sale of goods, including communications and networking devices, are recognised at

the time goods are dispatched to customers.

Revenue from a contract to provide services is recognised on a pro-rata basis over the term of the service

agreement.

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective

interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the

expected life of the financial asset to that asset’s net carrying amount.

Other revenue is recognised when the right to receive the revenue has been established.

All revenue is stated net of the amount of goods and services tax (GST).

(g) Share-based Payments

Equity settled compensation benefits are provided to employees via the Employee Option Plan and the

NetComm Wireless Limited Executive Employee Share Plan. Information relating to these plans is set out

in Note 24. The fair value of shares granted is recognised as an employee benefit expense with a

corresponding increase in equity.

Equity-settled share-based payment transactions with other parties are measured at the fair value of the

goods and services received, except where the fair value cannot be estimated reliably, in which case they

are measured at the fair value of the equity instruments granted, measured at the date the entity obtains

the goods or the counterparty renders the service. For cash-settled share-based payments, a liability

equal to the portion of the goods or services received is recognised at the current fair value determined at

each reporting date.

(h) Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated

depreciation and impairment losses. Cost includes all directly attributable expenditure incurred including

costs to get the asset ready for its use as intended by management. Costs include an estimate of any

expenditure expected to be incurred at the end of the asset’s useful life, including restoration,

rehabilitation and decommissioning costs.

The carrying amount of property, plant and equipment is reviewed annually by Directors for indications of

impairment. If any such indications exist, an impairment test is carried out, and any impairment losses on

the assets recognised.

Development assets

Cost incurred in acquiring assets for research and development is measured at costs less accumulated

amortisation and any accumulated impairment losses. Development assets are amortised on a straight

line basis over 3-6 years.



27


(h) Property, Plant and Equipment (continued)

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight line basis over their useful lives to

the Group commencing from the time the asset is held ready for use. Leasehold improvements are

depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the

improvements. The depreciable amount is the carrying value of the asset less estimated residual

amounts. The residual amount is based on what a similar asset of the expected condition of the asset at

the end of its useful life could be sold for.

The depreciation rates used for each class of depreciable assets are:

Class of Asset Useful Life

Plant and equipment 3-6 years

Leasehold improvements Over the term of the lease Development assets 3-6 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting

date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount.

These gains and losses are recognised in profit or loss.

(i) Impairment of Assets

At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to

determine whether there is any indication that those assets have been impaired. If such an indication

exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell

and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over

its recoverable amount is recognised in profit or loss. In assessing value in use, the estimated future cash

flows are discounted to their present value using a pre-tax discount rate that reflects current market

assessments of the time value of money and the risks specific to the asset for which the estimates of

future cash flows have not been adjusted.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates

the recoverable amount of the cash generating unit to which the asset belongs.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash generating

unit is increased to the revised recoverable amount, but so that the increased carrying amount does not

exceed the carrying amount that would have been determined had no impairment loss been recognised in

prior years. A reversal of an impairment loss is recognised immediately in profit or loss. Impairment of

goodwill is not reversed. Refer also to Note 1(y) on goodwill.



28


(j) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the

asset, but not the legal ownership that are transferred to entities in the Group are classified as finance

leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to

the fair value of the leased property or the present value of the minimum lease payments, including any

guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and

the lease interest expense for the period. The interest expense is recognised in the profit or loss so as to

achieve a constant periodic rate of interest on the remaining balance of the liability outstanding.

Lease payments for operating leases, where substantially all of the risks and benefits remain with the

lessor, are recognised in profit or loss on a straight line basis over the lease term. Contingent rentals are

recognised as an expense in the period in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight line

basis over the life of the lease.

(k) Derivative Financial Instruments

The fair value of all derivative financial instruments outstanding at reporting date are recognised in the

statement of financial position as either financial assets or financial liabilities. Changes in the fair value of

derivative financial instruments that are designated and effective as hedges of future cash flows are

recognised directly in equity, with any ineffective portion being recognised in profit or loss.

Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.

Derivatives embedded in other financial instruments, or other non-financial host contracts, are treated as

separate derivatives when their risks and characteristics are not closely related to those of the host

contract, and the host contract is not carried at fair value with unrealised gains or losses reported in profit

or loss.

(l) Financial Assets

Financial assets are classified into the following specified category: ‘loans and receivables’. The

classification depends on the nature and purpose of the financial assets and is determined at the time of

initial recognition.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not

quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured

at amortised cost using the effective interest method less impairment. Interest income is recognised by

applying the effective interest rate.

Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is

objective evidence that the asset is impaired. The allowance recognised is measured as the difference

between the asset’s carrying amount and the present value of estimated future cash flows discounted at

the effective interest rate computed at initial recognition.



29


(l) Financial Assets (continued)

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of

allocating interest income over the relevant period. The effective interest rate is the rate that exactly

discounts estimated future cash receipts (including all fees on points paid or received that form an integral

part of the effective interest rate, transaction costs and other premiums or discounts) through the

expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an

effective interest basis for debt instruments.

(m) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and in banks, deposits held at call with banks and

financial institutions, investments in money market instruments with maturities of three months or less

from the date of acquisition, and bank overdrafts. Bank overdrafts are shown within short term borrowings

in current liabilities on the statement of financial position.

(n) Inventories

Finished goods and raw materials are valued at the lower of cost and net realisable value. Cost is the

direct cost of purchase, plus freight and duty and any other costs directly attributable to acquisition. Net

realisable value represents the estimated selling price for inventories less all estimated costs of

completion and costs necessary to make the sale. Inventory is recognised on a weighted average cost

basis.

(o) Intangible Assets

Development costs

Expenditure during the research phase of a project is recognised as an expense when incurred.

Development costs (relating to the design and testing of new or improved products) are recognised as

intangible assets when it is probable that the project will generate future benefits considering its

commercial and technical feasibility and its cost can be measured reliably. The expenditure capitalised

consists of all directly attributable costs. Capitalised development costs are amortised from the point at

which the product is ready for use and for no longer than 3 years.

Subsequent to initial recognition, intangible assets are reported at cost less accumulated amortisation

and impairment costs.

Computer software

Computer software is measured on a cost basis less amortisation and impairment losses. Computer

software is amortised on a straight line basis over 3.3 years, commencing from the time the software is

ready for use.



30


(p) Borrowing Costs

Borrowing costs are recognised in profit or loss in the period in which they are incurred.

(q) Employee Benefits

Provision is made for the Group’s liability for employee benefits arising from services rendered by

employees to reporting date, including wages and salaries, annual leave and long service leave.

Employee benefits that are expected to be settled within one year have been measured at the amounts

expected to be paid when the liability is settled, plus related on costs. Employee benefits payable later

than one year have been measured at present value of the estimated future cash outflows to be made for

those benefits.

Employee benefits payable later than one year have been measured at present value of the estimated

future cash outflows to be made for those benefits. The expected future payments incorporate

anticipated future wage and salary levels, experience of employee departures and periods of service, and

are discounted at rates determined by reference to market yields at the end of the reporting period on

high quality corporate bonds (2014: government bonds) that have maturity dates that approximate the

timing of the estimated future cash outflows. Any re-measurements arising from experience adjustments

and changes in assumptions are recognised in profit or loss in the periods in which the changes occur.

The Group presents employee benefit obligations as current liabilities in the statement of financial

position if the Group does not have an unconditional right to defer settlement for at least twelve (12)

months after the reporting period, irrespective of when the actual settlement is expected to take place.

Contributions are made by the Group to employee superannuation funds which are of the defined

contribution type. Contributions to these defined contribution superannuation schemes are recognised as

an expense in the period they are payable.

(r) Financial Instruments

Debt and equity instruments

Debt and equity instruments are classified as either liabilities or equity in accordance with the substance

of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in

the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are

recorded at the proceeds received, net of direct issue costs.

Other financial liabilities

Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs

and are subsequently measured at amortised cost using the effective interest method, with the interest

expense recognised on an effective yield basis. The effective interest method is a method of calculating

the amortised cost of a financial liability and of allocating interest expense over the relevant period. The

effective interest rate is the rate that exactly discounts estimated future cash payments through the

expected life of the financial liability, or, where appropriate, a shorter period.

Trade payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost.



31


(s) Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past

events, for which it is probable that an outflow of economic benefits will result and that outflow can be

reliably measured.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on

the most reliable evidence available at the reporting date, including the risks and uncertainties associated

with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow

will be required in settlement is determined by considering the class of obligations as a whole. Provisions

are discounted to their present values, where the time value of money is material.

No liability is recognised if an outflow of economic resources as a result of present obligation is not

probable. Such situations are disclosed as contingent liabilities, unless the outflow of resources is remote

in which case no liability is recognised. Where an inflow of economic benefits is probable, an entity shall

disclose a brief description of the nature of the contingent assets at the end of the reporting period, and,

where practicable, an estimate of their financial effect.

(t) Earnings per Share

Basic earnings per share is determined by dividing net profit after income tax attributable to members of

the company, by the weighted average number of ordinary shares outstanding during the financial year,

adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share adjusts the figures in the determination of basic earnings per share by taking

into account the after income tax effect of interest and other financing costs associated with dilutive

potential ordinary shares and the weighted average number of shares assumed to have been issued for

no consideration in relation to dilutive potential ordinary shares.

(u) Dividends

A liability is recorded for the amount of any dividend declared, determined or publicly recommended by

the Directors on or before the end of financial year but not distributed at reporting date.

(v) Issued Capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net

of transaction costs and tax, from the proceeds.



32


(w) Standards and Interpretations Issued not yet Effective

Certain new accounting standards and interpretations have been published that are not mandatory for

30 June 2015 reporting periods. The Group’s assessment of the impact of these new standards and

Interpretations are set out below.

(i) AASB 9 Financial Instruments

AASB 9 introduces new requirements for the classification and measurement of financial assets and

liabilities.

These requirements improve and simplify the approach for classification and measurement of financial

assets compared with the requirements of AASB 139. The main changes are:

a. Financial assets that are debt instruments will be classified based on:

the objective of the entity’s business model for managing the financial assets; and

the characteristics of the contractual cash flows.

b. Allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income (instead of in profit or loss). Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument.

c. Introduces a ‘fair value through other comprehensive income’ measurement category for particular simple debt instruments.

d. Financial assets can be designated and measured at fair value through profit or loss at initial

recognition if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.

e. Where the fair value option is used for financial liabilities the change in fair value is to be

accounted for as follows:

the change attributable to changes in credit risk are presented in Other Comprehensive Income (‘OCI’),

the remaining change is presented in profit or loss.

If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes

in credit risk are also presented in profit or loss. Otherwise, the following requirements have generally

been carried forward unchanged from AASB 139 into AASB 9:

classification and measurement of financial liabilities; and derecognition requirements for financial assets and liabilities.



33


(w) Standards and Interpretations Issued not yet Effective (continued)

AASB 9 requirements regarding hedge accounting represent a substantial overhaul of hedge accounting

that enable entities to better reflect their risk management activities in the financial statements.

Furthermore, AASB 9 introduces a new impairment model based on expected credit losses. This model

makes use of more forward-looking information and applies to all financial instruments that are subject to

impairment accounting.

Management have yet to assess the impact that this amendment is likely to have on the financial

statements of the Group. However they do not expect to implement the amendments until all chapters of

AASB 9 have been published and they can comprehensively assess the impact of all changes.

(ii) AASB 15 Revenue from Contracts with Customers

AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and some revenue-related

Interpretations:

establishes a new revenue recognition model,

changes the basis for deciding whether revenue is to be recognised over time or at a point in

time,

provides new and more detailed guidance on specific topics (e.g., multiple element

arrangements, variable pricing, rights of return, warranties and licensing),

expands and improves disclosures about revenue.

The Group is yet to undertake a detailed assessment of the impact of AASB 15. However, based on the

Group’s preliminary assessment, the Standard is not expected to have a material impact on the

transactions and balances recognised in the financial statements when it is first adopted for the year

ending 30 June 2018.

At this stage, the Group is not able to estimate the impact of the new rules on the Group’s financial

statements. The Group will make more detailed assessments of the impact over the next twelve months.

(iii) AASB 2014-1 Amendments to Australian Accounting Standards (Part E: Financial Instruments)

Part E of AASB 2014-1 makes amendments to Australian Accounting Standards to reflect the AASB’s

decision to defer the mandatory application date of AASB 9 Financial Instruments to annual reporting

periods beginning on or after 1 January 2018. Part E also makes amendments to numerous Australian

Accounting Standards as a consequence of the introduction of Chapter 6 Hedge Accounting into AASB 9

and to amend reduced disclosure requirements for AASB 7 Financial Instruments: Disclosures and AASB

101 Presentation of Financial Statements.

When these amendments are first adopted for the year ending 1 January 2018, there will be no material

impact on the transactions and balances recognised in the financial statements.



34



(iv) AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations

The amendments to AASB 11 state that an acquirer of an interest in a joint operation in which the activity

of the joint operation constitutes a ‘business’, as defined in AASB 3 Business Combinations, should:

apply all of the principles on business combinations accounting in AASB 3 and other Australian

Accounting Standards except principles that conflict with the guidance of AASB 11. This

requirement also applies to the acquisition of additional interests in an existing joint operation that

results in the acquirer retaining joint control of the joint operation (note that this requirement

applies to the additional interest only, i.e., the existing interest is not remeasured) and to the

formation of a joint operation when an existing business is contributed to the joint operation by

one of the parties that participate in the joint operation; and

provide disclosures for business combinations as required by AASB 3 and other Australian

Accounting Standards.

When these amendments are first adopted for the year ending 30 June 2017, there will be no material

impact on the transactions and balances recognised in the financial statements.

(v) AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements

The amendments introduce the equity method of accounting as one of the options to account for an

entity’s investments in subsidiaries, joint ventures and associates in the entity’s separate financial

statements.


impact on the financial statements.

(vi) AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments address a current inconsistency between AASB 10 Consolidated Financial Statements

and AASB 128 Investments in Associates and Joint Ventures (2011).

The amendments clarify that, on a sale or contribution of assets to a joint venture or associate or on a

loss of control when joint control or significant influence is retained in a transaction involving an associate

or a joint venture, any gain or loss recognised will depend on whether the assets or subsidiary constitute

a business, as defined in AASB 3 Business Combinations. Full gain or loss is recognised when the

assets or subsidiary constitute a business, whereas gain or loss attributable to other investors’ interests is

recognised when the assets or subsidiary do not constitute a business.



35



This amendment effectively introduces an exception to the general requirement in AASB 10 to recognise

full gain or loss on the loss of control over a subsidiary. The exception only applies to the loss of control

over a subsidiary that does not contain a business, if the loss of control is the result of a transaction

involving an associate or a joint venture that is accounted for using the equity method. Corresponding

amendments have also been made to AASB 128 (2011).



(vii) AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle

These amendments arise from the issuance of Annual Improvements to IFRSs 2012-2014 Cycle in

September 2014 by the IASB.

Among other improvements, the amendments clarify that when an entity reclassifies an asset (or disposal

group) directly from being held for sale to being held for distribution (or vice-versa), the accounting

guidance in paragraphs 27-29 of AASB 5 Non-current Assets Held for Sale and Discontinued Operations

does not apply. The amendments also state that when an entity determines that the asset (or disposal

group) is no longer available for immediate distribution or that the distribution is no longer highly probable,

it should cease held-for-distribution accounting and apply the guidance in paragraphs 27-29 of

AASB 5.



(viii) AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101

The amendments:

clarify the materiality requirements in AASB 101, including an emphasis on the potentially

detrimental effect of obscuring useful information with immaterial information

clarify that AASB 101’s specified line items in the statement(s) of profit or loss and other

comprehensive income and the statement of financial position can be disaggregated

add requirements for how an entity should present subtotals in the statement(s) of profit and loss

and other comprehensive income and the statement of financial position

clarify that entities have flexibility as to the order in which they present the notes, but also

emphasise that understandability and comparability should be considered by an entity when

deciding that order

remove potentially unhelpful guidance in IAS 1 for identifying a significant accounting policy.





36



(ix) AASB 2015-5 Amendments to Australian Accounting Standards – Investment Entities: Applying the Consolidation Exception

The narrow-scope amendments to AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of

Interests in Other Entities and AASB 128 Investments in Associates and Joint Ventures introduce

clarifications to the requirements when accounting for investment entities. The amendments also provide

relief in particular circumstances, which will reduce the costs of applying the Standards.



(x) Critical Accounting Estimates and Judgements

The Directors evaluate estimates and judgments incorporated into the financial statements based on

historical knowledge and best available current information. Estimates assume a reasonable expectation

of future events and based on current trends and economic data, obtained both externally and within the

Group.

The following are the critical judgements (apart from those involving estimations, which are dealt with

below) that management has made in the process of applying the Group’s accounting policies and that

have the most significant effect on the amounts recognised in the financial statements.

Inventories

Note 8 sets out the categories of inventories carried. The net realisable value of inventories is the

estimated selling price in the ordinary course of business less estimated costs to sell which approximates

fair value less costs to sell. The key assumptions require the use of management judgement and are

reviewed annually. These key assumptions are the variables affecting the estimated costs to sell and

expected selling price. Any reassessment of cost to sell or selling price in a particular year will affect the

cost of goods sold.

Impairment of Assets

The Group assesses impairment at each reporting date by evaluating conditions specific to the Group

that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the

asset is determined. Value in use calculations performed in assessing recoverable amounts incorporate a

number of key estimates. Refer Note 11(b). The impairment testing is performed at least annually.



37


(x) Critical Accounting Estimates and Judgements (continued)

Deferred Tax Asset

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is

realised or liability is settled. Deferred tax is credited in profit or loss except where it relates to items that

may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred tax assets are recognised to the extent that it is probable that future tax profits will be available

against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the

assumption that no adverse change will occur in income taxation legislation and the anticipation that the

consolidated Group will derive sufficient future assessable income to enable the benefit to be realised and

comply with the conditions of deductibility imposed by the law.

Internally generated intangible assets – research and development expenditure

Distinguishing the research and development phases of a new customised software project and

determining whether the recognition requirements for the capitalisation of development costs are met

requires judgement. After capitalisation, management monitors whether the recognition requirements

continue to be met and whether there are any indicators that capitalised costs may be impaired.

Expenditure on research activities is recognised as an expense in the period in which it is incurred. An

internally-generated intangible asset arising from development (or from the development phase of an

internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or

sale;

the intention to complete the intangible asset and use or sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefits;

the availability of adequate technical, financial and other resources to complete the

development and to use or sell the intangible asset; and

the ability to measure reliably the expenditure attributable to the intangible asset during its

development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure

incurred from the date when the intangible asset first meets the recognition criteria listed above. Where

no internally-generated intangible asset can be recognised, development expenditure is recognised in

profit or loss in the period in which it is incurred. Subsequent to initial recognition, internally-generated

intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses,

on the same basis as intangible assets that are acquired separately.

R&D Tax Incentive

NetComm Wireless Limited is entitled to claim R&D tax incentive. The R&D tax incentive is calculated

using the estimated R&D expenditure multiplied by a 40% non-refundable tax offset. The Group accounts

for this tax incentive as tax credits which means that it will reduce income tax payable and current tax

expense. A deferred tax asset is recognised for any unclaimed tax credits that are carried forward as

deferred tax assets.



38


(y) Goodwill

Goodwill acquired in a business combination is initially measured at its cost, being the excess of the

cost of the business combination over the Group’s interest in the net fair value of the identifiable assets,

liabilities and contingent liabilities recognised at the date of the acquisition. Goodwill is subsequently

measured at its cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating

units, or Groups of cash-generating units, expected to benefit from the synergies of the business

combination. Cash-generating units or groups of cash-generating units to which goodwill has been

allocated are tested for impairment annually or more frequently if events or changes in circumstances

indicate that goodwill might be impaired. The impairment testing is performed at least annually.

If the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than

the carrying amount of the cash-generating unit (or groups of cash-generating units), the impairment

loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit

(or groups of cash-generating units) and then to the other assets of the cash generating units pro-rata

on the basis of the carrying amount of each asset in the cash-generating unit (or groups of cash-

generating units). An impairment loss recognised for goodwill is recognised immediately in profit or loss

and is not reversed in a subsequent period. On disposal of an operation within a cash-generating unit,

the attributable amount of goodwill is included in the determination of the profit or loss on disposal of the

operation.

(z) Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief

operating decision maker.

The Group has two operating segments: Machine to Machine (M2M) and Broadband business. In

identifying its operating segments, management generally follows the Group’s product mix, which

represent the main products and services provided by the Group.

(aa) Parent Entity Financial Information

The financial information for the parent entity, NetComm Wireless Limited (“NetComm”), disclosed in

Note 30 has been prepared on the same basis as the consolidated financial statements, except as set

out below.

Investments in subsidiaries, associates and joint venture entities

Investments in subsidiaries, associates and joint venture entities are account for at cost in the financial

statements of NetComm. Dividends received from associates are recognised in the parent entity’s

profit or loss when its right to receive the dividend is established.



39

2 Revenue and other income from operations

2015

2014

$

$

Revenue

Sales revenue

74,263,139

64,524,993

74,263,139

64,524,993

Other revenue

Interest revenue

64,136

66,197

Other revenue

-

2,055

64,136

68,252

Total revenue and other income

74,327,275

64,593,245

3 Expenses Included in expenses are the following specific items:

a) Other expenses comprising

2015

2014

$

$

Advertising and marketing

488,103

343,042

Property expenses

1,014,041

927,777

Distribution and selling costs

713,162

903,969

Insurance expenses 418,186 355,050

Legal & professional fees

866,903

602,585

Travel expenses

1,392,404

1,136,201

Contractor costs

748,532

665,483

Other expenses

1,369,934

1,212,139

7,011,265

6,146,246

b) Depreciation, amortisation and impairments

2015

2014

$

$

Depreciation of property, plant and equipment (Note 10(b))

785,089

964,553

Amortisation of intangible assets (Note 12(b))

3,030,350

2,703,292

3,815,439

3,667,845

c) Auditor’s remuneration

Grant Thornton is the auditor of the Group. Amounts received or due and receivable by Grant Thornton are detailed below:

2015

2014

$

$

Auditing or reviewing the financial statements

116,070

111,100

Taxation services

31,353

24,205

Other services - consulting

9,363

12,754

Total auditors' remuneration

156,786 148,059



40

3 Expenses (continued)

d) Rental expenses on operating leases

2015

2014

$

$

Minimum lease payments

816,869

749,380

e) Finance costs

2015

2014

$

$

Bank borrowings

569,964

718,198

Finance leases

34,554

8,432

604,518

726,630

4 Income Tax Expense/(Benefit)

a) Income tax recognised in profit or loss

2015

2014

$

$

i) Tax expense/(benefit) comprises:

Current tax benefit

(87,016)

(625,406)

Deferred tax expense relating to the origination and reversal of temporary differences

465,395

415,231

Under provision for tax in prior year

39,070

18,805

Income tax expense/(benefit)

417,449

(191,370)

ii) Income tax recognised in other comprehensive income

Income tax relating to components of other comprehensive income

1,536

293,787

Total income tax expense

418,985 102,417



41

4 Income Tax Expense/(Benefit) (continued)

b) The prima facie income tax expense on pre-tax accounting profit from continuing operations and other comprehensive income reconciles to the income tax expense in the financial statements as follows:

2015

2014

$

$

i) Amounts recognised in profit or loss

Net profit before tax

2,881,706

826,419

Tax at the Australian tax rate of 30%

864,512

247,925

- Non-deductible expenses

33,481

24,143

- Differential in overseas tax rates

(18,167)

(2,243)

- Other items

(53,658)

-

- Under provision for tax in prior years

39,070

18,805

- Research & Development tax concession

(447,789)

(480,000)

Income tax expense/(benefit)

417,449

(191,370)

ii) Amounts recognised in equity

Net change in the fair value of cash flow hedges

-

(5,119)

Reclassification of cash flow hedging to profit and loss

5,119

984,410

5,119

979,291

Tax at the Australian tax rate of 30%

1,536

293,787

Total amounts recognised in equity

1,536 293,787

c) Deferred tax assets/(liabilities) arise from the following:

Opening balance

Charged to income

Charged to other comprehensive

income

Closing balance

2015

$ $ $

$

Unused tax losses/credit

5,799,863 525,112 -

6,324,975

Temporary differences

Accrued expenses

125,418 57,920 -

183,338

Provisions

278,599 12,867 -

291,466

Inventory & Warranty

296,707 (148,663) -

148,044

Intangibles and Other

(1,987,119) (387,519) -

(2,374,638)

Cash flow hedges

1,536 - (1,536)

-

Total deferred tax assets

4,515,004 59,717 (1,536) 4,573,185



42

4 Income Tax Expense/(Benefit) (continued)

Opening balance

Charged to income

Charged to other comprehensive

income

Closing balance

2014

$ $ $

$

Unused tax losses/credit 5,017,276 782,587 - 5,799,863

Temporary differences

Accrued expenses

49,632 75,786 -

125,418

Provisions

286,643 (8,044) -

278,599

Inventory & Warranty

266,600 30,107 -

296,707

Intangibles and Other

(1,474,039) (513,080) -

(1,987,119)

Cash flow hedges

295,323 - (293,787)

1,536

Total deferred tax assets

4,441,435 367,356 (293,787) 4,515,004

5 Dividends No dividends were paid during the year-ended 30 June 2015 (2014: Nil).

2015

2014

$

$

Balance of franking account

591,961

591,961

Balance of franking account at period end adjusted for franking credits arising from dividends recognised as

receivables, and franking debits arising from payment of proposed dividends, and franking credits that may

be prevented from distribution in subsequent financial years. 6 Cash and Cash Equivalents

a) Cash on hand

2015

2014

$

$

Cash on hand

1,654

1,833

Cash at bank

3,398,690

4,305,657

3,400,344

4,307,490

b) Effective interest rate

These funds are bearing floating interest rates of between 0.05% and 1.7% (2014: 0.05% to 1.7%). Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows:

2015

2014

$

$

Cash and cash equivalents

3,400,344

4,307,490

3,400,344

4,307,490



43

7 Trade and Other Receivables

2015

2014

$

$

Trade receivables (i)

13,718,482

10,721,720

Allowance for doubtful debts

(70,862)

(56,580)

13,647,620

10,665,140

(i) The average credit period on sales of goods and rendering of services is 45 days, although a few

customers have End of Month 45 day terms. No interest is charged on overdue receivables. An allowance has been made for estimated unrecoverable trade receivable amounts arising from the past sale of goods and rendering of services, determined by reference to past default experience. The Group will also consider any change in the quality of the trade receivable from the date credit was initially granted up to the reporting date.

(ii) Before accepting any new customers, the Group obtains third party references to assess the potential

customer’s credit quality and define the credit limits by customer. Included in the Group’s trade receivable balance are debtors with a carrying amount of $3,373,112 (2014: $3,167,272) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these receivables is 49 days (2014: 52 days).

Aging of past due but not impaired

2015

2014

$

$

0-30 Days

3,170,856

2,441,482

30-60 Days

54,425

699,981

60+ Days

147,831

25,809

3,373,112

3,167,272

Movement in the allowance for doubtful debts

2015

2014

$

$

Balance at the beginning of the year

56,580

47,672

Increase in allowance for impairment

14,282

8,908

Balance at the end of the year

70,862

56,580

Aging of impaired receivables

2015

2014

$

$

0-30 Days

-

-

30-60 Days

-

-

60+ Days

70,862

56,580

70,862

56,580



44

8 Inventories

2015

2014

Current

$

$

Raw materials and stores

1,543,467

2,092,792

Communication modules

1,977,268

1,564,647

Finished goods

5,424,228

3,618,348

Goods in transit

1,179,118

126,074

Total Inventories

10,124,081

7,401,861

9 Other Assets

2015

2014

Current

$

$

Prepayments

1,181,756

740,290

Income tax receivable

-

50,432

Deposits and bonds

122,747

528,635

1,304,503

1,319,357

Non - current

Deposits and bonds

-

332,143

-

332,143

10 Property, Plant and Equipment (a) Summary of property, plant and equipment

2015

2014

$

$

Plant and equipment

At cost

5,535,616

4,431,663

Less accumulated depreciation

(4,304,773)

(3,859,509)

Total plant and equipment

1,230,843

572,154

Leased plant and equipment

At cost

1,028,008

915,207

Less accumulated amortisation

(864,679)

(778,125)

Total leased plant and equipment

163,329

137,082

Leasehold improvements

At cost

228,864

228,864


(219,231)

(212,340)

Total leasehold improvements

9,633

16,524

Development assets

At cost

1,217,590

1,029,563


(823,105)

(576,726)

Total development assets

394,485

452,837

Total property, plant and equipment

1,798,290

1,178,597



45

10 Property, Plant and Equipment (continued) (b) Movements in carrying amounts

Plant and equipment

Leased plant and

equipment

Leasehold

improvements Development

assets

Total

$ $ $ $ $

2015 Balance at the beginning of the year 572,154 137,082 16,524 452,837 1,178,597

Additions 1,103,953 112,801 - 188,028 1,404,782

Depreciation expenses

(445,264) (86,555) (6,891) (246,379) (785,089)

Carrying amount at the end of the year 1,230,843 163,328 9,633 394,486 1,798,290

2014 Balance at the beginning of the year 1,014,664 286,268 27,943 548,405 1,877,280

Additions 129,914 - - 135,956 265,870

Depreciation expenses

(572,424) (149,186) (11,419) (231,524) (964,553)

Carrying amount at the end of the year 572,154 137,082 16,524 452,837 1,178,597

11 Goodwill

2015

2014

$

$

Gross carrying amount

Balance at beginning of financial year

895,999

895,999

Balance at end of financial year

895,999

895,999

Net book value

At the beginning of the financial year

895,999

895,999

At the end of the financial year

895,999

895,999

(a) Impairment testing All Goodwill has arisen from acquisitions made during prior financial years.

The Group assessed the recoverable amount of goodwill by apply a value in use ("VIU") model for each identified cash-generating unit. The recoverable amounts of the cash-generating units were determined based on past experience and expectations for the future, utilising both internal and external sources of data and relevant industry trends. For the purpose of annual impairment testing, goodwill has been allocated for impairment testing purposes to the following cash-generating units (CGU’s) representing the goodwill that arose in the acquisition of each business:

2015

2014

$

$

M2M business

766,023

766,023

Broadband business

129,976

129,976

895,999 895,999



46

11 Goodwill (continued) (b) Key assumptions used

The following describes the key assumptions on which the Group has based its cash flow projections when determining value in use ("VIU") relating to the cash-generating units.

i) M2M Business Cash flows: The VIU calculations use after tax cash flow projections based on actual operating results and financial forecasts for the next four years which have been approved by management. These forecasts are based on management's best estimates to determine income, expenditure and cash flow for the M2M business. The present value of the expected cash flows of each CGU is determined by applying a discount rate. Growth rates: The primary assumptions underlying the cash flow projections for impairment testing include revenue growth of 95% (mainly attributed to ongoing growth from the Ericsson/NBN project) in FY16 (FY15 actual growth: 1.7%). The increase against the prior year is due to increased focus on M2M wireless opportunities followed by, for the purposes of this impairment testing, no revenue growth from 2016 till 2018 with a terminal value. Discount rates: Discount rates used are the post-tax weighted average cost of capital ("WACC") with appropriate adjustments for the risk profile relating to each CGU. Having assessed the risk specific to each CGU, management has applied a WACC of 8.5% (2014: 12.5%) to each CGU on the basis that the risk will fall within a similar range across all CGUs.

ii) Broadband Business Cash flows: The VIU calculations use after tax cash flow projections based on actual operating results and financial forecasts for the next four years which have been approved by management. These forecasts are based on management's best estimates to determine income, expenditure and cash flow for the broadband business. Growth rates: The primary assumptions underlying the cash flow projections for impairment testing include a 14% decrease in revenue in FY15 (FY15 actual growth : 29.24%) and flat growth during FY18-FY19 due to the maturity level of ADSL internet gateways in the market. Discount rates: Discount rates used are the post-tax weighted average cost of capital ("WACC") with appropriate adjustments for the risk profile relating to each CGU. Having assessed the risk specific to each CGU, management has applied a WACC of 8.5% (2014: 12.5%) to each CGU on the basis that the risk will fall within a similar range across all CGUs.

(c) Impairment of goodwill

Management believes that any reasonably possible change in the above key assumptions on which recoverable amounts are based would not cause the aggregate amount to exceed the recoverable amount of the CGUs. There was no impairment of goodwill during the year (2014: Nil).



47

12 Other Intangible Assets (a) Summary of intangible assets

2015

2014

$

$

Product development costs

Cost

19,492,776

15,014,281

Accumulated amortisation

(10,892,848)

(7,905,745)

Net carrying value

8,599,928

7,108,536

Computer software

Cost

933,764

861,089


(849,284)

(811,665)

Net carrying amount

84,480

49,424

Other intangibles

Cost

2,470,140

2,470,140


(2,460,148)

(2,454,520)

Net carrying amount

9,992

15,620

Total

8,694,400

7,173,580

(b) Movements in carrying amounts

Product development

costs Computer software

Other intangibles Total

$ $ $ $

2015


7,108,536

49,424

15,620 7,173,580

Additions

4,478,495 72,675 - 4,551,170

Amortisation

(2,987,103) (37,619) (5,628) (3,030,350)

Carrying amount at year end

8,599,928

84,480 9,992 8,694,400

2014


6,178,397

17,067

21,248

6,216,712

Additions 3,608,779 51,381 - 3,660,160

Amortisation

(2,678,640) (19,024) (5,628) (2,703,292)

Carrying amount at year end

7,108,536

49,424

15,620

7,173,580



48

13 Trade and Other Payables

2015

2014

$

$

Current unsecured liabilities

Trade payables (i)

11,779,856

6,430,928

Sundry payables and accrued expenses

2,994,497

2,867,734

Total current trade and other payables

14,774,353

9,298,662

(i) The average credit period on purchases of certain goods from various Asian countries is 60

days, although some request payment in advance of shipment. No interest is charged on overdue payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

14 Borrowings

2015

2014

$

$

Current - secured

Finance lease (i)

23,581

54,931

Trade refinance (ii)

-

2,178,370

Bank loan (iii)

-

2,500,000

Bank loan (iv)

2,783,124

-

Total current borrowings

2,806,705

4,733,301

Non-current - secured

Finance lease

79,789

24,539

Bank loan (iv)

458,333

-

Total non-current borrowings

538,122

24,539

Total borrowings

3,344,827

4,757,840

(i) The finance lease is secured against the underlying finance lease asset. Refer to Note 21

for further details of this borrowing. (ii) The trade refinance facility is secured by a General Security Agreement with a fixed and

floating charge over all assets and liabilities of NetComm Wireless Limited. This facility expired on 27 May 2015.

(iii) The bank loan is an amortising bank facility and is secured by a General Security

Agreement with a fixed and floating charge over all assets and liabilities of NetComm Wireless Limited. Interest is charged at 7.2%. This bank loan was repaid and the loan facility expired on 27

May 2015.

(iv) On 27 May 2015, the Company entered into new facilities with HSBC as outlined below.

These facilities are secured by a General Security Agreement with a fixed and floating charge over all assets and liabilities of NetComm Wireless Limited.

AUD 7Million bank loan. Interest is charged at 4.77% per annum.

AUD 1Million amortising loan maturing on 26 May 2017. Interest is charged at a floating rate of 5.17% per annum.

USD 3.4 Million Debtor Finance. Interest is charged at a base rate plus margin.

AUD1 Million Debtor Finance. Interest is charged at a base rate plus margin.



49

15 Employee Benefits

2015

2014

$

$

Current

Employee entitlements

951,250

910,723

Non - current

Employee entitlements

296,030

237,920

Total provisions

1,247,280

1,148,643

16 Other Liabilities

2015

2014

Current

$

$

Other

301,837

393,257

301,837

393,257

17 Issued Capital

2015

2014

$

$

129,049,890 (2014: 128,899,890) Ordinary shares - paid up no par value

15,432,272

15,349,022

(a) Movements in issued and paid up ordinary share capital of the company

2015 2014 2015 2014

No. No. $ $

At the beginning of the reporting period

128,899,890

124,339,890

15,349,022

14,331,878

Shares issued 15/07/2013 (i) - 4,000,000 - 931,324

Exercise of options(ii) - 560,000 - 85,820

Share-based payments (iii) 150,000 - 83,250 -

At reporting date

129,049,890

128,899,890

15,432,272

15,349,022

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value. Ordinary shares confer on their holders the right to participate in dividends and/or capital returns declared by the board and an entitlement to vote at any general meeting of the Company.

(i) On 15 July 2013, the Group issued a total of 4,000,000 ordinary shares at the issue price of $0.255

per share. Issue costs of $88,676 associated with the issue of shares have been directly paid from the proceeds of the issues. These costs have been deducted from the issued capital in the statement of financial position, rather than charged as an expense of the Company, as they are considered to form part of the net equity raised.



50

17 Issued Capital (continued)

(ii) In 2014, 560,000 ordinary shares were issued as a result of the exercise of vested options arising

from the employee shares options plan granted to employees. Options were exercised at an average price of $0.15325 per option. (see Note 24)

(iii) On 16 October 2014, the Group issued 150,000 ordinary shares under share-based payments.

(See Note 24 for details).

18 Reserves (a) Movements in share options & share rights reserve

2015

2014

$

$


395,808

395,808


395,808

395,808

(b) Movements in foreign currency translation reserve

2015

2014

$

$


335,600

94,035


(146,590)

241,565


189,010

335,600

(c) Movements in foreign exchange hedging reserve

2015

2014

$

$


(3,583)

(689,087)

Net change in the fair value of cash flow hedges

-

(5,119)

Reclassified to profit and loss account

5,119

984,410

Tax expense

(1,536)

(293,787)


-

(3,583)

The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments, net of tax, related to hedged transactions that have not yet occurred. In 2014, the Group used USD denominated borrowings as a hedge against USD sales that were expected to occur close to the maturity date of the borrowings. The cumulative deferred gain or loss on the hedge is recognised in other comprehensive income and included within the cash flow hedge reserve in equity. If a forecast transaction is no longer expected to occur or if the hedging instrument becomes ineffective, any related gain or loss recognised in other comprehensive income is transferred immediately to profit and loss.



51

19 Fair Value Measurement

The Group’s financial assets and financial liabilities measured and recognised at fair value at 30 June 2015 on a recurring basis are as follows: - there were no forward contracts as at 30 June 2015 (2014: $5,119). AASB 13 requires disclosure of fair value measurements by level of the fair value hierarchy. NetComm Wireless Limited’s cash flow hedges are classed as level 2 as the inputs for fair value measurement are based on observable market data (observable inputs). Measurement of fair value of forward contracts: The Group’s foreign currency forward contracts are not traded in active markets. The fair values of most of these contracts are estimated using a valuation technique that maximises the use of observable market inputs, e.g. market exchange and interest rates and are included in Level 2 of the fair value hierarchy. The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 30 June 2015 (2014: Nil).

20 Contingent Liabilities

The Group has provided certain guarantees totalling $647,639 for performance bonds as at 30 June 2015 (2014: Nil). There were no other contingent liabilities in existence at 30 June 2015 requiring disclosure in the financial statements.

21 Commitments (a) Capital expenditure commitments

There were no capital expenditure commitments as at 30 June 2015 (2014: $360,932). (b) Expenditure commitments

i) Non-cancellable operating lease commitments

2015

2014

$

$

Not longer than 1 year

555,260

659,725

Longer than 1 year and not longer than 5 years

142,090

362,731

697,350

1,022,456

The Group leases its offices in Australia and other countries under operating leases. Leases generally provide the right of renewal at which time all terms are renegotiated. Lease payments comprise a base amount and in some cases an incremental contingent rental. Contingent rents are normally based on movements in the CPI or market reviews.



52

21 Commitments (continued)

ii) Finance lease commitments

2015

2014

$

$

Not longer than 1 year

27,741

58,303

Longer than 1 year and not longer than 5 years

84,699

25,049

Minimum future lease payments

112,440

83,352

Less future finance charges

(9,070)

(3,882)

Present value of minimum lease payments

103,370

79,470

Included in the financial statements:

Current borrowings (Note 14)

23,581

54,931

Non - current borrowings (Note 14)

79,789

24,539

103,370

79,470

Finance leases relate to a motor vehicle. The Group has the option to purchase the motor vehicle at the conclusion of the lease arrangements. The Group’s obligation under finance leases are secured by the lessor’s title to the leased assets.

22 Cash Flow Information Reconciliation of cash flow from operations with profit after income tax

2015

2014

$

$

Profit for the year

2,464,257

1,017,789

Non-cash flows in profit:

Depreciation and amortisation

3,815,439

3,667,845

Interest received

(64,136)

(66,197)

Change in the fair value of cash flow hedges

3,583

685,504

Foreign exchange translation differences

(146,590)

241,565

Share-based payments

83,250

-

Changes in operating assets and liabilities:

(Increase) in trade and other receivables

(2,982,480)

(5,964,759)

(Increase)/decrease in inventories

(2,722,220)

2,680,482

Decrease/(increase) in other assets

346,997

(96,676)

(Increase) in deferred tax assets

(58,181)

(73,569)

Increase in trade and other payables

5,475,691

3,398,393

Increase/(decrease) in other liabilities

64,506

(34,892)

Increase in provisions

98,637

201,107

Net cash from operating activities

6,378,753

5,656,592



53

23 Related Party Transactions There were no related party transactions other than transactions with Key Management Personnel.

2015

2014

$

$

Short term benefits

1,751,694

2,386,472

Post employment benefits

166,684

124,567

Other long term benefits 28,681 20,894

Share-based payments

83,250

-

Total

2,030,309

2,531,933

Further information on remuneration of key management personnel can be found in the remuneration report within the Directors’ Report.

24 Share-Based Payments (a) Employee option plan An employee share scheme was established in 1993 and current details are noted below.

The board of directors may at its discretion offer options to employees in such numbers and at such times as it thinks fit, having regard to: a) each employee’s length of service; b) the contribution to the Group which has been made by the employee; c) the potential contribution of the employee to the Group; and d) any other matters which the board considers relevant. The Board has decided to discontinue using the Options Plan in favour of the new Share Rights Plan. Entitlement: Each option entitles the holder to subscribe for and be allotted one share in the capital of the company at the exercise price per share. Shares issued on the exercise of options will rank pari passu with all existing shares in the capital of the company from the date of issue. Vesting: All outstanding options have now vested. Exercise of Options: An option may be exercised: (i) After an option has vested in accordance with the rules outlined above, but before expiry of

the option, provided the participant is at the time of exercise an employee or director of the Group.

(ii) Within 180 days:

Of the death, disablement or retirement of the participant; or

After an option has vested in accordance with the rules outlined above and the participant resigns or is retrenched.

(iii) If the Board otherwise permits it. (iv) If any person or that person’s associate has acquired or become entitled to 40% or more of

the Company’s voting shares.



54

24 Share-Based Payments (continued)

As at 30 June 2015, there were no options outstanding (2014: Nil). No options issued to employees expired during the financial year in accordance with the rules of the Share Option Plan (2014: Nil). There were no options exercised during the year ended 30 June 2015 (2014: 560,000). Subsequent to year end, no options were exercised or issued to employees or directors. Valuations of Options: The fair value at grant date of all options is independently determined using the Binomial Approximation pricing model.

(a) Options are granted in accordance with the terms of the Employee Option Plan (refer above for detail),

(b) The expected price volatility is based on a daily closing share price for NetComm Wireless Limited over the 12 months immediately prior to date of grant: N/A (2014: N/A),

(c) The risk free interest rate is based on the 5 year Commonwealth Bond rate on date of issue: N/A,

(d) The expected dividend yield is based on the dividends received by shareholders of NetComm Wireless Limited during the 12 months prior to date of grant: 0% (2014: 0%).

On 1 July 2011 NetComm Wireless Limited “Executive Employee Share Plan" ("EESP") was introduced for invited Participants selected on the basis of their capability to be able to directly impact the Company's performance.

(b) Share rights held by key management personnel

Details of share rights held directly, indirectly or beneficially by key management personnel and their related parties are as follows:

PARTICIPANTS Balance on 1 July 2014

Fair Value at grant date

Rights Exercised

Rights Lapsed

Balance at 30 June 2015

Total Vested at 30 June

2015

David Stewart - $ - - - - - Ken Sheridan - $ - - - - - Danny Morrison* 250,000 $ 32,500 - 250,000 - - Steve Collins 250,000 $ 32,500 - 250,000 - - Michael Cornelius 250,000 $ 32,500 - 250,000 - -

Total 750,000 $ 97,500 - 750,000 - -

* Danny Morrison passed away on 10 February 2015. Implicit Share Price used in determining value of initial share rights: $0.20 Actual share price on 1 July 2011 (the date of grant): $0.13 Actual share price on 1 July 2012 (the first Vesting Date): $0.13



55

24 Share-Based Payments (continued)

(b) Share rights held by key management personnel (continued) On July 1, 2011 NetComm Wireless Limited “Executive Employee Share Plan" ("EESP") was introduced for invited Participants selected on the basis of their capability to be able to directly impact the Company's performance. Under this Plan, a Participant is made an offer of a number of Share Rights, as determined by the Board. A Share Right is an entitlement to a cash (for cash participants) or equity (for equity participants) amount equivalent to the value of one fully paid ordinary share in the Company for nil consideration, subject to the achievement of vesting conditions which include service and company performance over a 3-year period. The Share Rights will vest when the Company meets or exceeds a “performance hurdle” based on a specific EBITDA target as at the end of years 1, 2 and 3 respectively, if the Participant remains employed with the Company at that time. If the Company does not meet a performance hurdle at a given year (either year 1 or year 2), the hurdle can be “re-tested” in the subsequent year. The “re-test” would be based on a comparison of the cumulative actual EBITDA results for the current and past years compared to the targeted EBITDA results. The Board has resolved that any entitlements to shares in NetComm Wireless resulting from the EESP will be purchased on market.

As at 1 July 2014, the cumulative EBITDA performance hurdles were not met so share rights for all the participants have lapsed. Accordingly, the fair value of these Rights has been assessed as nil.

(c) Other shares issued On 16 October 2014, the Group has issued 150,000 ordinary shares under share-based payments and the total share-based payment expenses were $83,250 (2014: Nil).

25 Retirement Benefit Obligations Superannuation commitments:

The Group provides employees with access to external superannuation plans that provide benefits on retirement, resignation, disability or death. This is a defined contribution plan.

26 Earnings per Share

2015

2014

$

$

Earnings reconciliation

Net profit for the year 2,464,257 1,017,789

Basic and diluted earnings 2,464,257 1,017,789

2015

2014

Weighted average number of ordinary shares used as the denominator No.

No.

Number for basic earnings per share 129,005,917 128,569,808

Number for diluted earnings per share

129,005,917

128,569,808

2015

2014

Earnings per share

Cents

Cents

Basic earnings per share 1.91 0.79

Diluted earnings per share 1.91 0.79



56

27 Financial Instruments

(a) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group's overall strategy is to focus on the global M2M and rural broadband sector. During the financial year the Group has put in place a new $14 million facility with HSBC Australia. The new facility will better cater for the Company's ongoing working capital financing needs as the business continues to grow and will reduce the cost of debt to the Company. The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 14, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated profits. Operating cash flows are used to maintain and expand the Group’s assets as well as to pay for operating expenses, including tax liabilities.

(b) Financial Risk Management Objectives The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial and exchange rate markets and seeks to minimise potential adverse effects on the Group’s performance. Risk management is carried out by the Board of Directors through the Audit and Risk Management Committee.

(c) Foreign Currency Risk Management The Group is mainly exposed to US dollars (USD) (2014: US dollars and Euros). The Group undertakes certain transactions denominated in foreign currencies that are different from the functional currency of the respective entities undertaking the transactions, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising hedges. The Group in particular has developed a Foreign Exchange hedging strategy to manage its Foreign Exchange Risk on future purchases using Foreign Currency (FX) Forwards. The strategy is to use USD FX Forwards as a hedge against future USD purchases related to its AUD revenues. This is to reduce the variability in the AUD cash flows arising from USD denominated purchases consisting of firm commitments and highly probable forecast transactions. Any gains or losses on revaluing of the forwards are recognised in Other Comprehensive Income and shown in the balance sheet in Equity as a “Foreign Exchange Hedging Reserve”. The amount in this reserve is reversed to the Profit and Loss Account when the forwards are settled. For the year ended 30 June 2015, circa $1.5 million of FX forward contracts were put in place and were used as a hedge against future “Specific” purchases the Group made for one of its ISP's project. At reporting date there were no exchange contracts outstanding that needed revaluation. In order to avoid exposure to significant foreign exchange gains or losses on revaluation of USD borrowings, the Group continues to denominate its borrowings in AUD. All other foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into AUD at the closing rate 0.7680. (2014: 0.9420).



57

27 Financial Instruments (continued)

(c) Foreign Currency Risk Management (continued)

The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date that are denominated in a currency that is different to the functional currency of the respective entities holding the monetary assets and liabilities are as follows:

Foreign currency sensitivity analysis The Group is mainly exposed to US dollars (USD). The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currencies (arising from monetary assets and liabilities held at reporting date in a currency different to the functional currency of the respective entities holding the assets or liabilities), which represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items (including liabilities for goods in transit) and adjusts their translation at period end for a 10% change in foreign currency rates. This analysis demonstrates the impact of each 10% change of foreign currency rates against the Australian dollar on the profit or loss after tax.

Profit or Loss

2015

2014

US Dollars

187,014

257,287

The foreign exchange impact in the table is attributable to the exposure outstanding on USD receivables and borrowings at year end in the Group. In management’s opinion, the above sensitivity analysis is representative of the inherent foreign exchange risk during the course of the year. The Group includes subsidiaries whose functional currencies are different to the Group’s presentation currency. As stated in the Group’s Accounting Policies per Note 1(c), on consolidation the assets and liabilities of this entity are translated into Australian dollars at exchange rates prevailing on the reporting date. The income and expenses of this entity are translated at the average exchange rates for the period. Exchange differences arising are classified as equity and are transferred to a foreign exchange translation reserve. The Group’s future reported other comprehensive income could therefore be impacted by changes in rates of exchange between the Australian Dollar and the other functional currencies. The following table details the Group's sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currencies arising from translation of foreign operations. A positive number indicates an increase in other comprehensive income where the Australian dollar weakens against the respective currency. For a strengthening of the Australian dollar against the respective currency there would be an equal and opposite impact on the other comprehensive income and other equity, and the balances below would be negative.

Other comprehensive income

2015

2014

New Zealand Dollars 15,806 266,604

Closing rate Liabilities Assets

2015 2014 2015 2014 2015 2014

US Dollars

0.768 0.942 11,207,583 4,479,697 12,890,713 6,701,527



58


(d) Interest Rate Risk Management

The Group is exposed to interest rate risk as the parent entity borrows funds at floating interest rates. The Group does not hedge this risk through derivatives such as interest rate swaps. The Group's exposure to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

(e) Interest rate sensitivity analysis The sensitivity analysis below has been determined based on a 50 basis point change in interest rates taking place at the beginning of the financial year and held constant throughout the reporting period, which represents management’s assessment of the possible change in interest rates. At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s net profit would increase/(decrease) by $25,657 (2014: increase/(decrease) by $21,420). This is mainly attributable to the Group's exposure to interest rates on its variable rate borrowings.

(f) Credit Risk Management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group uses publicly available financial information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and controlled by counterparty limits that are reviewed and approved by the CFO. Trade receivables consist of a few large customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Group is exposed to the credit risk. The Group has two major customers (Note 29) who generated around 50% (FY14: 52%) revenues to the Group. However, there is minimal credit risk arising from these customers based on the customer's global presence and position, historical information and previous trading experience. Other than the item noted above, the Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk. Refer further detail in Note 7.

(g) Liquidity Risk Management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group also uses a trade payables finance facility to manage its liquidity risk.



59


(g) Liquidity Risk Management (continued) The table below details the Company’s and the Group’s drawn and undrawn facilities.

Consolidated

2015 2014

$ $

Secured Bank Loan 7,000,000 9,000,000

Used at reporting date (Note 14) 2,400,000 -

Used at reporting date (Note 14) - 2,178,370

Unused at reporting date

4,600,000

6,821,630

Amortising Facility 958,333 2,500,000

Used at reporting date (Note 14) 958,333 2,500,000

Unused at reporting date - -

Debtor Finance (AUD) 1,000,000 -

Surplus debtor receipts (Note 14 (iv)) (116,876) -


1,116,876

-

Debtor Finance (USD) USD 3,400,000 -

Used at reporting date (Note 14 (iv)) - -


USD 3,400,000

-

Liquidity and interest risk tables The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

Weighted avg

effective interest

rate

Less than 1 month

1-3 months 3 months-

1 year 1-5 years 5+ years

% $ $ $ $ $

2015

Non-interest bearing 0.00% 6,344,417 5,383,588 - - - Finance lease liability 4.49% 2,312 4,624 20,806 82,387 -

Variable interest rate instruments 4.88% 2,452,531 126,706 345,786 494,252 -

8,799,260 5,514,918 366,592 576,639 -

2014

Non-interest bearing 0.00% 4,032,282 1,922,045 - - - Finance lease liability 8.58% 5,115 10,229 42,959 25,049 -

Variable interest rate instruments 7.24% - 5,032,441 - - -

4,037,397 6,964,715 42,959 25,049 -



60


(g) Liquidity Risk Management (continued) The following tables detail the Group’s expected maturity for its non-derivative financial assets. The tables have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period based on the earliest date on which the Group can expect to receive. The table includes both interest and principal cash flows.

Weighted avg

effective interest

rate

Less than 1 month

1-3 months 3 months-

1 year 1-5 years 5+ years

% $ $ $ $ $ 2015

Non-interest bearing 0.00% 10,274,508 3,373,112 - - - Variable interest rate instruments

1.54%

3,400,344

-

122,747

-

-

13,674,852 3,373,112 122,747 - -

2014

Non-interest bearing 0.00% 7,253,711 3,167,271 - - - Variable interest rate instruments

1.71% 4,307,940 - 845,485 - -

11,561,651 3,167,271 845,485 - -

(h) Capital management policies and procedures The Group's capital management objectives are:

to ensure the Group's ability to continue as a going concern; and

to provide an adequate return to shareholders.

The Group monitors capital on the basis of the carrying amount of equity plus its borrowings, less cash and cash equivalents as presented on the face of the statement of financial position. The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. Capital for the reporting periods under review is summarised as follows:

2015

2014

$

$

Borrowings 3,344,827 4,757,840

Cash and cash equivalents (3,400,344) (4,307,490)

Net (Cash)/Borrowings (55,517) 450,350

Total equity

24,595,269

22,190,769

Net Borrowings to Equity ratio - 0.02



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(i) Fair Value of Financial Instruments The fair value of financial assets and financial liabilities are determined as follows:

The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices;

The fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.

The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

28 Events after the Reporting Date

There has not arisen during the interval between the end of the reporting period and the date of this report any item, transaction or event of a material and unusual nature that has, in the opinion of the Directors of the Company, significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years.



62

29 Segment Reporting

Information reported to the chief decision maker for the purposes of resource allocation and assessment of segment performance focuses of:

Broadband Business

M2M Business The Broadband business segment supplies communication devices, including but not limited to Mobile Internet Gateways, designed and manufactured for use primarily by consumer and small medium enterprises (SME). The M2M business segment division specialises in the development of advanced industrial-grade and commercial 3G /4G wireless broadband products and solutions for business continuity (disaster recovery), primary mobile broadband and remote M2M connectivity. NetComm Wireless' M2M products, solutions and services are designed to support applications in areas such as transport, metering, security, surveillance, banking, health and mining.

The following is an analysis of the Group’s revenue and results by reportable operating segment.

Revenue Segment Profit

30 June 30 June 30 June 30 June

2015 2014 2015 2014

$ $ $ $

Revenue generated from external customers

Broadband Business 40,506,032 31,345,569 3,249,516 2,416,415

M2M Business 33,757,107 33,179,424 3,988,011 2,736,227

Intersegment Revenue

Broadband Business 1,551,358 1,271,956 - -

M2M Business 930,701 706,374

Intersegment Eliminations (2,482,059) (1,978,330) - -

Segment result 74,263,139 64,524,993 7,237,527 5,152,642

Other income 64,136 68,252

Depreciation and amortisation expense (3,815,439) (3,667,845)

Finance costs (604,518) (726,630)

Group Profit before tax 2,881,706 826,419

Income tax (expense)/benefit (417,449) 191,370

Consolidated revenue and profit for the period

74,263,139 64,524,993 2,464,257 1,017,789

No segment assets and liabilities are disclosed because there is no measure of segment assets or liabilities regularly reported to the chief decision maker. The revenue reported above represents revenue generated from external customers. Intersegment revenues represent transfers between segments,which are eliminated on consolidation.



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29 Segment Reporting (continued)

Revenues from a single customer greater than 10% of total revenues reside in both Broadband & M2M business segment.

2015 2014

Broadband M2M Total Broadband M2M Total

Customer A

14,400,752

-

14,400,752

10,908,114

-

10,908,114

Customer B

-

22,467,133

22,467,133

-

22,798,902

22,798,902

Total Revenue

40,506,032

33,757,107

74,263,139

31,345,569

33,179,424

64,524,993 Customer Share of Total (%) 36% 67% 50% 35% 69% 52%

During 2015, $7,513,826 or 10.1% (2014: $5,936,607 or 9.2%) of the Group's revenues were generated from New Zealand. Segment profit represents the profit earned by each segment without allocation of other income, finance costs and depreciation and amortisation.

(a) Reconciliation of Group's operating segments to financial statements

30 June

30 June

2015

2014

$

$

Revenue and other income

Total reportable segment revenues

74,263,139

64,524,993

Other Segment income

64,136

68,252

Revenue & other income

74,327,275

64,593,245

Profit or Loss

Total reportable segment operating profit

7,237,527

5,152,642

Other segment profit

64,136

68,252

EBITDA

7,301,663

5,220,894

Depreciation and amortisation expense

(3,815,439)

(3,667,845)

Finance costs

(604,518)

(726,630)

Profit before tax

2,881,706

826,419



64

30 Parent Entity Disclosures

(a) Financial position 2015 2014

Assets $ $

Current assets 18,293,032 16,882,254

Non-current assets 20,333,454 18,466,904

Total assets 38,626,486 35,349,158

Liabilities

Current liabilities 28,898,190 25,034,111

Non-current liabilities 834,152 262,459

Total liabilities 29,732,342 25,296,570

Equity

Issued capital 15,432,319 15,349,069

Retained earnings/(accumulated losses) (6,933,983) (5,688,703)

Reserves

General reserves 395,808 395,808

Foreign exchange hedging reserve - (3,586)

Total equity 8,894,144 10,052,588

(b) Financial performance

2015 2014

$ $

Loss for the year (1,245,280) (1,239,345)

Other comprehensive expense (1,536) (298,906)

Total comprehensive loss (1,246,816) (1,538,251)

(c) Commitments for the acquisition of property, plant and equipment by the parent entity

2015 2014

Finance lease liabilities $ $

Not longer than 1 year 27,741 58,303

Longer than 1 year and not longer than 5 years 84,699 25,049

112,440 83,352

Finance leases relate to a motor vehicle. The Group has the option to purchase the motor vehicle at the conclusion of the lease arrangements. The Group’s obligation under finance leases are secured by the lessor’s title to the leased assets.



65

30 Parent Entity Disclosures (continued)

(d) Subsidiaries

Percentage Percentage

owned owned

2015 2014

Name of subsidiary Country of incorporation

% %

NetComm Wireless (NZ) Limited New Zealand

100 100

Call Direct Cellular Solutions 2003 Pty Ltd Australia

100 100

C10 Communications Pty Ltd Australia

100 100 NetComm Wireless (Canada) Limited Canada

100 100

NetComm Wireless Inc. United States of America

100 100 NetComm Wireless (UK) Limited United Kingdom

100 100

31 Company Details The registered office and principal place of business of the Company is: NetComm Wireless Limited Level 2, 18-20 Orion Road,

Lane Cove, NSW 2066

NetComm Wireless Limited Directors’ Declaration

66

In the opinion of the directors of NetComm Wireless Limited (a) the consolidated financial statements and notes of NetComm Wireless Limited are in accordance with

the Corporations Act 2001, including: a. giving a true and fair view of its financial position as at 30 June 2015 b. and of its performance for the financial year ended on that date; and c. complying with Australian Accounting Standards (including the Australian Accounting

Interpretations) and the Corporations Regulations 2001

(b) There are reasonable grounds to believe that NetComm Wireless Limited will be able to pay its debts as and when they become due and payable.

(c) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2015.

(d) Note 1 confirms that the consolidated financial statements also comply with International Financial

Reporting Standards.

Signed in accordance with a resolution of the Directors On behalf of the Directors

J Milne D P J Stewart Director Director 4 September 2015 4 September 2015

Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the

context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm

is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and

are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its

Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

67

Level 17, 383 Kent Street

Sydney NSW 2000

Correspondence to:

Locked Bag Q800

QVB Post Office

Sydney NSW 1230

T +61 2 8297 2400

F +61 2 9299 4445

E [email protected]

W www.grantthornton.com.au

Independent Auditor’s Report

To the Members of NetComm Wireless Limited

Report on the financial report

We have audited the accompanying financial report of NetComm Wireless Limited (the

“Company”), which comprises the consolidated statement of financial position as at 30 June

2015, the consolidated statement of profit or loss and other comprehensive income,

consolidated statement of changes in equity and consolidated statement of cash flows for

the year then ended, notes comprising a summary of significant accounting policies and

other explanatory information and the directors’ declaration of the consolidated entity

comprising the Company and the entities it controlled at the year’s end or from time to time

during the financial year.

Directors’ responsibility for the financial report

The Directors of the Company are responsible for the preparation of the financial report

that gives a true and fair view in accordance with Australian Accounting Standards and the

Corporations Act 2001. The Directors’ responsibility also includes such internal control as

the Directors determine is necessary to enable the preparation of the financial report that

gives a true and fair view and is free from material misstatement, whether due to fraud or

error. The Directors also state, in the notes to the financial report, in accordance with

Accounting Standard AASB 101 Presentation of Financial Statements, the financial

statements comply with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We

conducted our audit in accordance with Australian Auditing Standards. Those standards

require us to comply with relevant ethical requirements relating to audit engagements and

plan and perform the audit to obtain reasonable assurance whether the financial report is

free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial report. The procedures selected depend on the auditor’s

judgement, including the assessment of the risks of material misstatement of the financial

report, whether due to fraud or error.

68

In making those risk assessments, the auditor considers internal control relevant to the

Company’s preparation of the financial report that gives a true and fair view in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose

of expressing an opinion on the effectiveness of the Company’s internal control. An audit

also includes evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by the Directors, as well as evaluating the

overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide

a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the

Corporations Act 2001.

Auditor’s opinion

In our opinion the financial report of NetComm Wireless Limited:

a is in accordance with the Corporations Act 2001, including:

i giving a true and fair view of the consolidated entity’s financial position as at 30

June 2015 and of its performance for the year ended on that date; and

ii complying with Australian Accounting Standards and the Corporations

Regulations 2001; and

b complies with International Financial Reporting Standards as disclosed in the notes to

the financial statements.

Report on the remuneration report

We have audited the remuneration report included in pages 6 to 12 of the directors’ report

for the year ended 30 June 2015. The Directors of the Company are responsible for the

preparation and presentation of the remuneration report in accordance with section 300A of

the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration

report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s opinion on the remuneration report

In our opinion, the remuneration report of NetComm Wireless Limited for the year ended

30 June 2015, complies with section 300A of the Corporations Act 2001.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

S M Coulton

Partner - Audit & Assurance

Sydney, 4 September 2015

NetComm Wireless Limited ASX Additional Information

69

The shareholder information set out below was applicable as at 26 August 2015.

1) Distribution of Shareholders Analysis of number of shareholders by size of holding:

Category of Holding Number Number of Shares

1 - 1,000 290 164,876

1,001 - 5,000 938 2,682,722

5,001 - 10,000 488 3,851,104

10,001 - 100,000 856 28,086,341

100,001 - share and over 134 94,264,847

Total 2,706 129,049,890

2) Twenty Largest Shareholders

The names of the twenty largest holders of quoted shares are:

Shareholder

Number of Shares

Percentage of total shares

Brad Industries Pty Ltd & Rooke Lane Pty Ltd 23,000,000 17.82%

NBT Pty Ltd & Associated Entities 6,025,242 4.67%

JP Morgan Nominees Aust Ltd 5,349,765 4.15%

National Nominees Limited 4,323,168 3.35%

UBS Nominees Pty Ltd 3,392,983 2.63%

Mr Gary John Jackson & Ms Christine Gregg 2,711,661 2.10%

UBS Wealth Management Australia Nominees P/L 2,053,974 1.59%

Askey Computer Corp 2,053,528 1.59%

Mirrabooka Investments 2,039,834 1.58%

ACK Proprietary Ltd 2,000,000 1.55%

Yarradale Investments Pty Ltd 1,832,158 1.42%

Michael John Cornelius 1,806,170 1.40%

Rapaki Pty Ltd 1,600,000 1.24%

RBC Investor Services Australia Nominee Pty Ltd 1,517,804 1.18%

Dr Colin Rose/Mathstatica Pty Ltd 1,368,322 1.06%

Caprera Pty Ltd 1,300,000 1.01%

Ms DG Leong & Mr RA Press 1,070,000 0.83%

HSBC Custory Nominees 933,613 0.72%

Mr Nicholas Andrew Roxburgh 846,000 0.66%

Mrs Cher Suey Cheah 820,000 0.64%

Total 66,044,222 51.19%

3) Voting Rights All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

4) Substantial Shareholders

As at 26 August 2015 the substantial shareholders were as follows:

Shareholder Number of Shares Percentage of total

shares

Brad Industries Pty Ltd & Rooke Lane Pty Ltd 23,000,000 17.82%

Ophir Asset Management Pty Ltd (shares held through JP Morgan Nominees Aust Ltd and National Nominees Limited) 7,888,563 6.11%

NetComm Wireless Limited Corporate Directory 30 June 2015

70

DIRECTORS J Milne (Non-Executive Director & Chairman) K Boundy (Non-Executive Director) S Black AM (Non-Executive Director) D P J Stewart (CEO & Managing Director) K J P Sheridan (CFO & Executive Director)

COMPANY SECRETARY K J P Sheridan

REGISTERED OFFICE Level 2, 18-20 Orion Rd Lane Cove NSW 2066 Telephone: +61 (2) 9424-2000 Facsimile: +61 (2) 9427-9260

AUDITOR Grant Thornton Audit Pty Limited Chartered Accountants Level 17 383 Kent Street, Sydney, NSW 2000, Australia

SOLICITORS Maddocks Angel Place 123 Pitt St, Sydney NSW 2000

BANKERS HSBC Bank Australia Limited Level 31 500 George Street Sydney, NSW 2000, Australia

SHARE REGISTER Link Market Services Level 12 680 George Street Sydney NSW 2000 Telephone: +61 (2) 8280 7552

WEB ADDRESS www.netcommwireless.com

http://www.netcommwireless.com/

netcomm wireless limited annual report for the year …

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